Retirement options

You can take 25% of your pension fund as a retirement lump sum. The balance can then be used for one or more of the following:

• Buying an annuity
• Investing in an Approved Retirement Fund (ARF) or Approved Minimum Retirement Fund (AMRF)
• Taking a taxed cash lump sum.

Got a group or executive pension?

If you have a group pension or an executive pension, you could also take a retirement lump sum of up to one-and-a-half times your final salary (this will depend on the length of time you’ve been employed). You must use the balance of your pension to buy a pension for life.

What about tax?

You may be able to take some or all of your retirement lump sum without paying any tax. Here are the numbers you need to know:

• €200,000: This is the maximum tax-free amount you can get.
• €200,000 – €500,000: Lump sums between €200,000 and €500,000 will be taxed at the standard rate of income tax (20% as of January 2019).
• Greater than €500,000: Lump sums greater than €500,000 will be taxed at your marginal rate of tax – meaning income tax, 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 7 December 2005.

An annuity is what we usually refer to as a pension and is the most common option for people when they’re retiring. You use your pension fund to buy a retirement annuity from an insurance company. This gives you a guaranteed income for the rest of your life.

You may also be able to make provision for a dependant’s annuity depending on your personal circumstances.

How much will you get?

The amount of income you get will be partly based on your life expectancy at retirement so it will vary according to your age, gender and the size of your retirement fund.

What about tax?

Payments from your annuity are treated as income so you will have to pay income tax on them as well as any other taxes that might be due.

Approved Retirement Funds (ARFs) and Approved Minimum Retirement Funds (AMRFs) are funds in which you can invest your pension pot when you retire.

After you have taken any lump sum and before you can invest in an ARF, you MUST transfer €63,500 or the remainder of your pension fund (if less) to an AMRF or use it to buy an annuity.

You can invest any balance over €63,500 in an ARF or withdraw it as cash but remember – any cash you take out of your pension pot at this stage will be taxed as income.

About Approved Minimum Retirement Funds

You will need an AMRF if:

• You are under 75 years of age or
• You don’t have a guaranteed pension of €12,700 a year (including all of your pensions and annuities and the Social Welfare Pension).

An AMRF gives you limited access to your money as you can’t access any of the original amount you invested until you reach 75. But you can withdraw any money earned from the growth of your original amount.

When you reach 75 or you confirm that you get a guaranteed pension of €12,700, your AMRF will automatically become an ARF and you will be able to make withdrawals from it whenever you want.

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

However, if you don't have a guaranteed pension of €12,700 per year or you’re under 75, you’ll have to invest €63,500 or the rest of your fund (if less) in an AMRF, or use the money to buy an annuity.

What about tax?

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