At Retirement

The four options at retirement vary, but are broadly:

  • A retirement lump sum
  • An annuity
  • Investing part of your pension fund in an Approved Retirement Fund (ARF)
  • Take a taxed cash lump sum.

Retirement lump sum

You can take part of your pension fund as a retirement lump sum. You may be able to take some or all of this retirement lump sum tax free.

Everyone has the option to take 25% of the fund as a retirement lump sum.

The balance of the fund can then be used for one or more of the following:

  • Buy an annuity
  • Invest in an Approved Retirement Fund (ARF) or Approved Minimum Retirement Fund (AMRF)
  • Take as a taxed cash lump sum

If you have a group pension or an executive pension you also have the option to take a retirement lump sum of up to one-and-a-half times your final salary, depending on the length of time you have actually been employed. The balance of your pension must be used to buy a pension for life.

However your AVC fund can be used for one or more of the following:

  • Buy an annuity
  • Invest in an Approved Retirement Fund (ARF) or Approved Minimum Retirement Fund (AMRF)
  • Take as a taxed cash lump sum

You may be able to take some or all of your retirement lump sum without paying any tax. The maximum tax free amount you can receive is €200,000. Retirement lump sums between €200,000 and €500,000 will be subject to standard rate income tax (20% as at January 2016).

Any retirement lump sums greater than €500,000 will be taxed at your marginal rate as income, the Universal Social Charge, PRSI (if applicable) and any other charges or levies (‘’tax’’) will also be taken.

Both the €200,000 and €500,000 limits include all retirement lump sums you have received since 7th December 2005.

Annuity

An annuity is what many people commonly refer to as a pension. The most common option when retiring is to use your accumulated pension fund to buy a retirement annuity from an insurance company. This is a guaranteed income for the rest of your life. You may also be able to make provision for a dependant’s annuity as well (depending on your personal circumstances).

The amount of income you receive will be based on, among other things, your life expectancy at retirement - so will vary by retirement age and gender - and the size of your retirement fund.

Payments from your annuity are treated as income so you will have to pay income tax on it and any other taxes due at that time.

Investing in an Approved Retirement Fund (ARF)

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 lump sum, and before you can commence an ARF, €63,500, or the remainder of the pension fund if less, must be transferred to an AMRF or used to buy an annuity.

An AMRF differs from an ARF only to the extent that, until you are 75 years old, or you confirm that you are in receipt of a guaranteed pension income of €12,700 per annum, you may only withdraw the amount (if any) by which the value of the AMRF has grown since its commencement. In other words, you cannot access any of the original capital sum invested.

When you reach age 75, or you confirm that you have become in receipt of the guaranteed pension income amount (as set out above), your AMRF will automatically become an ARF – and you will have the freedom to make withdrawals from it, as and when you please.

Any balance over €63,500 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 income of at least €12,700 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, any investment growth from your AMRF may be withdrawn.

Taxed Cash Lump Sum

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.

To take this additional amount as taxed cash, you will be required to invest €63,500 (or the remainder of the fund, if less) into an AMRF, or use the €63,500 to buy an annuity. However, you do not need to satisfy this requirement if you have a guaranteed pension income of €12,700 p.a. or you are 75 years or older.

Any money that you withdraw in this way will be taxed as income at your marginal (higher) income tax rate and may also be liable to PRSI and the Universal Social Charge (USC).

Warning: The value of your investment may go down as well as up.
Warning: If you invest in this product you may lose some or all of the money you invest.
Warning: Past performance is not a reliable guide to future performance.
Warning: This product may be affected by changes in currency exchange rates.
Warning: Withdrawals and switches from funds investing directly or indirectly in property may be deferred for up to 6 months.
Warning: Withdrawals and switches from all other funds may be deferred for up to 3 months.

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