Converting PRSA to ARF
- Thread starter tester12
- Start date
There is eligilibity conditions for entering an ARF.
You have to be retirement age.
You have to have a guaranteed income of €12,700 or else put €63,500 in an AMRF (Approved Minimum Retirement Fund, this money is locked away until age 75) with the balance going to an ARF.
Charges are based on the company selected and the fund choice so there is no one answer to this.
Also bear in mind there are tax implications and you are effectively forced to draw down 3% of the fund each year.
Consult a good independent financial advisor before going this route to ensure its the right move for you and because there may be cheaper options available to you than just sticking with the one company.
www.CheaperLifeAssurance.ie
You have to be retirement age.
You have to have a guaranteed income of €12,700 or else put €63,500 in an AMRF (Approved Minimum Retirement Fund, this money is locked away until age 75) with the balance going to an ARF.
Charges are based on the company selected and the fund choice so there is no one answer to this.
Also bear in mind there are tax implications and you are effectively forced to draw down 3% of the fund each year.
Consult a good independent financial advisor before going this route to ensure its the right move for you and because there may be cheaper options available to you than just sticking with the one company.
www.CheaperLifeAssurance.ie
Do not convert PRSA to AMRF/ARF
StevieC figures are out of date. The AMRF figure is c.120,000 and the imputted distribution charge is 5%p.a. for the balance invested into an ARF
Now on to the main point; The benefits of a PRSA is that when you draw down your TFLS you can leave the remainding fund in the PRSA. This is then known as a Vested PRSA. A lot of brokers advise people to transfer the remaining fund to an AMRF/ARF (if not indeed the vast majority) as it generates a commision for them despite this being wrong advice, indeed some of the life companies even advise this as it creates "new business" for them.
The added benefit of leaving the remaining fund in the PRSA is that this not considered a ARF for inputted distribution purposes which is currently 5%. Inputted distribution is where the Revenue assumes that you cash in 5% of your ARF fund and charge you income tax, PRSI and USC on that amount whether you want that money of not.
So do not transfer your PRSA to an AMRF/ARF
StevieC figures are out of date. The AMRF figure is c.120,000 and the imputted distribution charge is 5%p.a. for the balance invested into an ARF
Now on to the main point; The benefits of a PRSA is that when you draw down your TFLS you can leave the remainding fund in the PRSA. This is then known as a Vested PRSA. A lot of brokers advise people to transfer the remaining fund to an AMRF/ARF (if not indeed the vast majority) as it generates a commision for them despite this being wrong advice, indeed some of the life companies even advise this as it creates "new business" for them.
The added benefit of leaving the remaining fund in the PRSA is that this not considered a ARF for inputted distribution purposes which is currently 5%. Inputted distribution is where the Revenue assumes that you cash in 5% of your ARF fund and charge you income tax, PRSI and USC on that amount whether you want that money of not.
So do not transfer your PRSA to an AMRF/ARF
Thank you all.
1. I qualify on the Age grounds.
2. I already have an AMRF for 63K this was taken out just before Finance Bill changing amount was published. This should mean on my 2nd PRSA I have the ability to convert to ARF or a vested PRSA as detailed above. When I took this out I found I had lost 5% when transferring to AMRF even though it was the same Company and same Fund.
3. Reason for converting to ARF would be to avoid the new levy which presumably would apply to a vested PRSA as well as normal PRSA. The 5% withdrawals I would put into a new PRSA.
1. I qualify on the Age grounds.
2. I already have an AMRF for 63K this was taken out just before Finance Bill changing amount was published. This should mean on my 2nd PRSA I have the ability to convert to ARF or a vested PRSA as detailed above. When I took this out I found I had lost 5% when transferring to AMRF even though it was the same Company and same Fund.
3. Reason for converting to ARF would be to avoid the new levy which presumably would apply to a vested PRSA as well as normal PRSA. The 5% withdrawals I would put into a new PRSA.
LDFerguson
Registered User
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Depending on what details emerge in the Finance (Number 2) Bill on Thursday, this may become a popular course of action. As you say, current information is that PRSAs are subject to the levy while ARFs are not.
If you deal directly with an insurance company, they will usually deduct normal commission from the ARF. Although yours is a straight like-for-like transfer, in "sales" terms an ARF is a brand new product. You should be able to negotiate a better deal with a broker if you've already decided on your course of action.
This would only be advisable if you have other pensionable income to offset for tax purposes. Pensions (including withdrawals from ARFs) are not pensionable in themselves. So if your only income is from pensions, you can't claim tax relief against further contributions into a pension.
Liam D. Ferguson
Duke of Marmalade
Registered User
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Fergie and others:
1) Is it possible to take out an AMRF even if one is eligible for an ARF (i.e. enough income)?
2) Is it possible to convert (part of) an ARF into an AMRF?
I presume that AMRFs escape the imputed distribution.
1) Is it possible to take out an AMRF even if one is eligible for an ARF (i.e. enough income)?
2) Is it possible to convert (part of) an ARF into an AMRF?
I presume that AMRFs escape the imputed distribution.
LDFerguson
Registered User
- Messages
- 4,663
No and No. If you have an AMRF and subsequently qualify on the income requirements, you're supposed to notify your ARF QFM and they convert it into an ARF.
I saw a recent letter from Revenue to the IIF and Revenue were a bit milk-and-watery on this. IIF asked how QFMs are supposed to know if an AMRF holder later qualifies on income. Revenue suggested that QFMs should write to all AMRF holders telling them to get in touch if they subsequently qualify on income.
Correct.
To avoid an imputed distribution, a vested PRSA is your only man.
Duke of Marmalade
Registered User
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- 4,449
Thanks Fergie
Shows how messy these things can become. AMRFs were originally inferior to ARFs because of the Age 75 rule, so there was no issue, everyone wanted an ARF instead of an AMRF.
But now that AMRFs escape the deemed distribution they are now superior to an ARF so we have the silly situation where the Revenue are trying to limit the use of AMRFs. Seems to me they should have allowed 5% distributions on AMRFs and that AMRFs should be subject to imputed distribution.
Shows how messy these things can become. AMRFs were originally inferior to ARFs because of the Age 75 rule, so there was no issue, everyone wanted an ARF instead of an AMRF.
But now that AMRFs escape the deemed distribution they are now superior to an ARF so we have the silly situation where the Revenue are trying to limit the use of AMRFs. Seems to me they should have allowed 5% distributions on AMRFs and that AMRFs should be subject to imputed distribution.
LDFerguson
Registered User
- Messages
- 4,663
If you've no need for the income from an ARF for the next three years, why don't you just vest the PRSA, i.e. withdraw the tax-free lump sum from it? Vested PRSAs are exempt from the levy also, but the vested PRSA idea also avoids having to take taxable 5% annual income if you don't need it.
(There may be specifics of your personal situation that render this plan inadvisable.)
“Vested PRSA” means that you have claimed part of your retirement benefits and have not decided whether to invest in a annuity or a AMRF/ARF. As benefits have been part drawn Revenue treats vested PRSA as a holding account and therefore escapes imputted distribution charges and pensions levy.
Technically a vested prsa is open to new funds but you cannot claim a second TFLS for the new funds, so you are better off investing in a new prsa contract.
Technically a vested prsa is open to new funds but you cannot claim a second TFLS for the new funds, so you are better off investing in a new prsa contract.
Apologies, if this is a repeat.
Can anyone confirm this?
If I vest my PRSA before the end of June 2010, I do not have to pay the Levy?
(I am just making sure thats its not connected to the Tax Year in case I must Vest before the end of 2011 to avoid the Levy.)
The Levy is very heavy on a fund that has not moved in years, actually is at a loss viz funds paid in and a Heavy Loss viz Funds paid in and Inflation.
M
Can anyone confirm this?
If I vest my PRSA before the end of June 2010, I do not have to pay the Levy?
(I am just making sure thats its not connected to the Tax Year in case I must Vest before the end of 2011 to avoid the Levy.)
The Levy is very heavy on a fund that has not moved in years, actually is at a loss viz funds paid in and a Heavy Loss viz Funds paid in and Inflation.
M