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Approved Retirement Funds (ARF)

Approved Retirement Fund

An option available to you at retirement is to invest your pension fund in an Approved Retirement Fund (ARF).

ARFs are special investment funds which can give you increased flexibility in terms of how you use your pension fund after retirement.

With an ARF you manage and control your pension fund. You can be happy in the knowledge that you can withdraw as much of this as you wish, should you ever need to. Any withdrawals you take from your ARF will be subject to income tax*, the Universal Social Charge and PRSI (if you are liable for this). In the meantime the fund will continue to be invested in funds of your choice.

*Tax on any withdrawals is deducted as per the tax certificate submitted to us or in other cases at the marginal tax rate (40% as of June 2015). The ARF holder is then obliged to claim back any over deducted tax by applying to their own local Inspector of Taxes.

To find out whether you have the option at retirement to invest in an ARF please talk to your Financial Adviser.

Important points to consider before buying an ARF

Your fund can continue to increase in retirement

 By investing in an ARF, your money can remain invested in funds that offer growth potential. The level of this growth obviously will depend on what fund you wish to invest in and its performance. This can amount to significant growth over time (especially if you are not withdrawing money from the fund). You should note that there will be an annual imputed distribution. However, if the growth does not exceed the imputed distribution or any amount drawn down then the fund will fall in value each year.

WARNING: The value of your investment may go down as well as up.

Your fund passes to your estate on your death

One of the main differences between an ARF and an annuity is that with an ARF you own your retirement fund. This means that when you die you can leave any remaining funds to your spouse/civil partner or other beneficiaries. If you leave the funds to your spouse or civil partner, the funds can be transferred to an Approved Retirement Fund in their name.

In all other cases, the funds are wound up and the proceeds are passed to your estate. If your estate has to pay income tax, we must take this before paying the proceeds of your fund to your estate.

Your tax adviser will be able to advise you on the Capital Acquisition Tax (Inheritance Tax) implications which may apply also.

A summary of the tax rules after your death (based on rates at June 2015).

ARF inherited by Income Tax due Capital Acquisitions Tax due
Surviving spouse No tax due on the transfer to an ARF in the spouse's name No
Children (under 21) No tax due Yes*
Children 21 and over Yes (30%) No
Others (including surviving spouse/civil partner if benefit paid out as a lump sum) Yes, at deceased's tax rate at the time of death (either 20% or 40%) Yes*








*Normal Capital Acquisitions Tax thresholds apply.

You are in control of the fund and can take as much or as little from the fund as your financial situation requires

Many people who choose to invest in an ARF have already secured a satisfactory income in retirement (quite often a pension).  They appreciate that, with an ARF, their money is available to them should they need it but remains invested if they don’t. You can also choose to convert your ARF fund into an annuity at any stage.

You can manage your total retirement income to maximise the amount that is taxable at the lower rate

If you wish to withdraw money regularly from your ARF to boost your retirement income, you have the flexibility to do so. People at typical pension levels who withdraw regularly have the option of taking just enough to keep them on the lower rate of tax. This is very attractive if you received tax relief on your contributions at the higher rate but only pay tax on the benefits at the lower rate.  Any withdrawals you take from your ARF will be subject to income tax*, the Universal Social Charge and PRSI (if you are liable for this).

*Tax on any withdrawals is deducted as per the tax certificate submitted to us or in other cases at the marginal tax rate. The ARF holder is then obliged to claim back any over deducted tax by applying to their own local Inspector of Taxes.

WARNING: The income you get from this investment may go down as well as up.

What are the disadvantages of an ARF?

Risk to future income

You need to consider carefully if you are going to use your ARF to pay you an income. Depending on the size of your fund there will be an imputed drawdown from your fund every year. If the ARF grows at a lower rate than the level of imputed drawdown or income you take, then the value of the ARF may run out and leave you with no income.

Investment risk

Depending on the fund(s) you choose to invest your ARF in, the value of the fund could fall in value.

Investing in funds

Depending on which fund you invest in, its value can fall as well as rise over the period of your investment. We recommend that you consider an ARF as an investment for at least five years or more. In general, the longer you leave your investment, the better it is likely to perform. By choosing a low-risk fund, you are protecting any gains you make over the period of investment. However, the potential for large gains is lower than if you choose a high-risk fund.

High-risk funds mainly invest in company shares so their value is not protected but you do have the potential to gain significantly, especially over the long term. If you invest in these funds you should realise that, in wanting a higher return, you could lose some of the value of your investment. If you decide to take a regular income from your ARF and the investment growth is lower than the level of income you have chosen, this will reduce your original investment.

Consider the risks associated with investing. Everyone's situation is different, and everyone handles risk differently. With the help of your pension contact, you are the best person to decide how much risk you are comfortable with.

Conditions for investing in an ARF

Before you invest in an ARF, you must either:

  • Have a guaranteed income of at least €12,700* a year, or
  • Set aside €63,500* of your pension fund to buy a pension (annuity).

Imputed distribution

One of the rules governing ARFs is that tax, Universal Social Charge and PRSI, if applicable, must be deducted as if income were taken, even if no income is taken in a particular tax year. Below we explain how this is applied to an ARF.

  • From the year you turn 61, tax is payable on a minimum withdrawal on the 30 November* each year of 4% of the value of the fund at that date. This withdrawal is liable to income tax, Universal Social Charge and PRSI, if applicable. From the year you turn 71 the minimum withdrawal is increased to 5%.
  • Where the fund value is greater than €2 million the minimum withdrawal will be 6%. If you have more than one Approved Retirement Fund (ARF) and these are with different managers then you must appoint a nominee Qualified Fund Manager (QFM) who will be responsible for ensuring a withdrawal of 6% is taken from the total value of your ARFs. It is your responsibility to let your ARF providers know if you have other Approved Retirement Funds and Vested Personal Retirement Savings Accounts with a total value of greater than €2 million.
  • Where a greater withdrawal is made during the year, tax will be paid on the greater withdrawal amount. The minimum withdrawal rate is set in line with the required imputed distribution amount which may be altered to reflect changes in legislation. You can choose to take a higher withdrawal amount if you wish. 
  • You should seek advice on whether it is appropriate to draw down the 4%/5% or 6% of your fund value.
  • Annual imputed distribution reduces the benefit of gross roll up**.

*These amounts and the valuation dates may change as specified by the Government. The information is correct as at June 2015.
**The investments are allowed to grow tax-free until such time as an event happens which incurs a tax liability, known as a chargeable

Irish Life ARFs

Due to the imputed distribution requirements introduced by the Finance Act 2006, Irish Life will deduct a minimum withdrawal of 4% of the value of the ARF during December each year. This is automatically deducted from your ARF and paid to you net of income tax, PRSI (if applicable), Universal Social Charge (USC) and any other charges or levies (tax) due at
the time on the withdrawals you make.

This applies from the year you turn 61. Where the total value of your ARFs and vested PRSAs exceed €2 million then a withdrawal of 6% from your ARF must be made each year.

It is your responsibility to let us know if you have other ARFs and vested PRSAs with a total value greater than €2 million. For more information please speak to your financial adviser.

More Information

For more information please contact your company pension advisor, your broker, or Irish Life Sales Support on (01) 704 1845 or email


WARNING: The value of your investment may go down as well as up.
WARNING: This product advice may be affected by changes in currency exchange rates.
WARNING: The income you get from this 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.

The assets in these funds may be used for the purposes of securities lending in order to earn an additional return for the fund. While securities lending increases the level of risk within the fund it also provides an opportunity to increase the investment return.


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