Retirement Planning

Approved Retirement Funds :

Mc Geough Financial Consultants Ltd. are specialist advisors in relation to Approved Retirement Funds (ARF’s) and Approved Minimum Retirement Funds (AMRF’s). We pride ourselves on the quality of our advice. 

It is crucial that you get sound advice when it comes to arranging an ARF or AMRF.

We have access to multiple ARF/AMRF fund options in the market and we take great care in advising our clients on all the options available.

Investing in an Approved Retirement Fund

Approved Retirement Funds (ARFs) and Approved Minimum Retirement Funds (AMRFs) are funds managed by qualifying fund managers in which you can invest the proceeds of your pension fund when it matures.

After you have taken any tax free lump sum, €118,000 or the remainder of the pension fund if less, must be transferred to an AMRF or used to buy an annuity. Any balance over €118,000 can be invested in an ARF or withdrawn as cash. Any cash withdrawn at this stage will be taxed as income.You do not have to invest in an AMRF if:

You have a guaranteed pension or annuity of at least €18,000 a year for life (all of your pensions and annuities including the Social Welfare Pension can be taken into account for this purpose).

or

+ You are over age 75.

The sum invested in an AMRF cannot be withdrawn until you reach age 75. However, income or growth from your AMRF may be withdrawn.

How is my ARF/AMRF invested?

Your ARF/AMRF is invested in funds of your choice. These funds grow tax free.

Can I take a regular income from my ARF?

Yes, you can take a regular income and this is taxed at your marginal (higher) tax rate. This income is generally not guaranteed and depends heavily on how your investment performs. Taking a regular income may reduce the total value of your ARF, especially if investment returns are poor and/or you choose a high rate of income. The higher the level of regular income you choose, the higher the chances that your ARF will be fully used up in your lifetime. If your ARF is used up no further income will be paid.

Approved Retirement Fund

Can I take lump sums out of my ARF?

Yes, you can take money out whenever you want to. All withdrawals will be taxed as income at your marginal (higher) tax rate.

What other tax is payable on my ARF?

Since 2010 tax is payable on deemed distributions from an ARF. This means that if you do not take a withdrawal, a tax charge will nevertheless be made to your policy based on a notional withdrawal or ‘deemed distribution’ amount. The deemed distribution is 5% of the value of your ARF assets at 31 December each year. Actual withdrawals made by you will be deducted from the distribution to arrive at a ‘net’ deemed distribution on which tax will apply at your marginal tax rate. These rules do not apply until you are 60 years of age or over for the entire tax year.

What happens to my ARF when I die?

The value of your ARF and AMRF is passed to your estate when you die. Depending on who inherits the money, different levels of tax will apply. If your ARF or AMRF is inherited by your husband or wife, there is no immediate tax. It transfers to an ARF in the name of your spouse.

Children over the age of 21 who inherit money from an ARF or AMRF will be liable to pay tax at the standard tax rate (20% from 6th April 2001) irrespective of whether they inherit the money directly, or through the spouse of the original ARF or AMRF owner.

Advantages of the ARF/AMRF

You have control and flexibility over how your retirement fund is invested.

Your fund can be invested in a wide range of funds, giving it the potential to continue to grow.

When you die, the value of your ARF/AMRF is passed on to your estate.

You have access to your money whenever you need it.

You can vary your level of regular income to suit your needs.

Disadvantages of the ARF/AMRF

Your fund is not guaranteed to last for your lifetime.

 If you withdraw more income than your fund grows by each year, your fund could run out before you die.

The value of your fund could fall or rise, depending on where it is invested. You may not want this kind of risk.

Taxed cash

After you take your tax free cash, you can take all or part of the balance of your fund as cash and pay tax on it.

Before you withdraw this cash, you must either have bought an AMRF, or be able to prove that you have guaranteed income of at least €18,000 a year for the rest of your life. Any money that you withdraw in this way will be taxed as income at your marginal (higher) income tax rate.

Advantages of taxed cash

Gives you quick access to a cash lump sum.

Disadvantages of taxed cash

Gives you quick access to a cash lump sum.

Unless you have sufficient income from another source, you could run out of money.