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An Introduction to Approved Retirement Funds (ARFs) & Approved Minimum Retirement Funds (AMRFs)

Retirement fund
Image by Lending Memo

The decisions made at retirement will a have long term impact on your retirement income. You should review your post retirement income with your financial advisor and discuss your options for retirement benefits. 

What is an ARF?

An Approved Retirement Fund (ARF) is a personal retirement fund where you can keep your money invested after retirement, as a lump sum. You can withdraw from it regularly to give yourself an income, on which you pay income tax, PRSI and Universal Social Charge (USC). Any money left in the fund after your death can be left to your next of kin. (Source)

If you do not have this guaranteed minimum income and are aged under 75, you must invest your accumulated pension money in an Approved Minimum Retirement Fund (AMRF). 

What is an AMRF? 

An Approved Minimum Retirement Fund (ARMF) is similar to an ARF. The main difference is that you cannot withdraw from the initial capital invested until you have reached 75 years of age. However, you can withdraw at any time from any investment gains made within the AMRF. 

Your AMRF funds can be invested in a wide range of assets, depending on the level of risk you are willing to accept. All withdrawals are assessable for Income Tax, PRSI and USC.

An AMRF becomes an Approved Retirement Fund (ARF) in the following scenarios:
  • reaching age 75 
  • satisfying the minimum guaranteed income 
  • requirement as agreed by Revenue before age 75
  • death before age 75

On your death, any remaining value of your policy can be left in your will as part of your estate, or can be transferred into an ARF in your spouse’s name.

PRSA Retirement FLowchart
 
ARF Rules (from Citizens Information)

In 2011, the rules about investing in ARFs were changed. The Finance Act 2013 provides that these changes have been rescinded until 2016. The 2011 rules stipulated that you must set aside 10 times the maximum rate of the State Pension (Contributory) – €119,800 at present – or a lesser amount if less is available in your pension fund in the AMRF. The pre-2011 rules provided that you must set aside €63,500.

The pre-2011 rules were temporarily reinstated by the Finance Act 2013. This will remain the case until 2016 when it is intended that the 2011 rules will come into effect again. 

How an AMRF fund works

There is an excellent example of how an AMRF fund works in an article here: Knowing how an AMRF fund can work for your pension


References

- Consumer Help

- Citizens Information

- Irish Independent




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