Tax free lump sum

The tax free lump sum you can take when you retire depends on the type of pension plan you have.

If you have a personal pension plan or PRSA you can choose to take up to 25% of the plan's accumulated value as a tax free lump sum.

If you have a group pension plan or AVC, you can take up to 1.5 times your final annual earnings as a tax free lump sum, provided you have at least 20 years of service with the company.

If you are a company director who holds at least 5% of your company's shares, you can choose between the options above - you can elect to take a tax free lump sum of 25% of the plan's accumulated value, OR up to 1.5 times your final annual earnings (provided you have at least 20 years of service with the company).

Annuities

After you take your tax free lump sum, you can use the balance of your fund to buy an annuity. An annuity provides you with a guaranteed income for the rest of your life. 

If you contribute to a group pension and are not a 5% Director, buying an annuity is your only option after you take your tax free lump sum. 

If you have a personal pension, PRSA, AVC or are a 5% Director contributing to a group pension, you can choose to:

• buy an annuity with all or some of your fund
• invest in an Approved Retirement Fund
• take a taxable lump sum
  

Taxable lump sum

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

Befoer you withdraw this cash, you must either have bought an AMRF or be able to prove you have guaranteed income of at least €12,700 a year for the rest of your life.

Any taxable lump sum you take will be taxed at your marginal (higher) income tax rate. 

Approved Retirement Fund (ARF)

Approved Retirement Funds (ARFs) are funds managed by qualifying fund managers. You can invest the proceeds of your pension fund in an ARF once the pension matures (at retirement), and withdraw from it regularly to give yourself an income.

Approved Minimum Retirement Fund (ARMF)

Unless you have a guaranteed pension income for life of at least €12,700 a year, you must set aside €63,500 of your retirement fund in an ARMF until you reach 75.

Until then, you can only withdraw any growth in value the fund may deliver.