Approved Retirement Funds
An Approved Retirement fund or “ARF” in simple terms is a personal investment account. ARFs can be used to transfer a retirement fund subject to certain criteria. An ARF is an alternative option to an annuity or a pension.
Under the current pension rules an individual can take a 25% tax free lump sum up a limit €200,000.00. Most people generally avail of this option. Once the tax free lump sum has been taken, people generally take the option of an annuity or an ARF. The ARF option can be attractive as the balance after any applicable charges have been taken are for the benefit of the ARF holders’ estate on death.
ARF holders enjoy the flexibility of being able to withdraw funds if and when they need them. The full balance of an ARF can be withdrawn by the individual should they choose to. Withdrawals made from an ARF are subject to PAYE income tax, Universal Social Charge “USC” and Class S PRSI (for persons under the age of 66).
An ARF holder can run the risk of the fund being depleted entirely which could leave an individual with no remaining retirement income. Also when making withdrawals as a percentage of the fund, the level of withdrawal as a percentage will fall as the fund becomes less.