# what stamp is paid when drawing down from ARF



## Bladerunner (24 Aug 2020)

Perhaps someone might know answer to this. Surplus of an AVC is put into an ARF. When I reach 60 I intend drawing down 4% each year. Does anyone know what stamp is paid on this amount, and does those stamps add to previous earned stamp contributions for a contributory pension.


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## jpd (24 Aug 2020)

ARF payments are treated as income and as such are liable to income tax, PRSI (or stamps if you prefer) and USC if these are applicable to you.

All PRSI payments cease at 66.

So if you do pay PRSI contributions, then yes, I believe that they will contribute towards your PRSI record for contributory pension entitlements


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## Early Riser (24 Aug 2020)

jpd said:


> So if you do pay PRSI contributions, then yes, I believe that they will contribute towards your PRSI record for contributory pension entitlements



PRSI on an ARF are at Class S (4%). Class S does count towards the PRSI record for State Pension, purposes, etc. However, I suspect there is some catch to this is your ARF drawdown is relatively small and you do not have other income at Class S.

Say your 4% ARF drawdown comes to €1,000. So you will pay €40 PRSI. I doubt this will be sufficient to keep the annual PRSI record up to date.


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## jpd (24 Aug 2020)

If you returning a Form 11 as a self-employed person, there is a min of PRSI contribution of € 500 - and this does count towards a full contributory


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## Early Riser (24 Aug 2020)

jpd said:


> If you returning a Form 11 as a self-employed person, there is a min of PRSI contribution of € 500 - and this does count towards a full contributory



Yes, but with an ARF the 4% PRSI is deducted at source along with any tax and USC.

 If someone is getting (say) an occupational pension they will be taxed under PAYE. There is no Form 11, unless otherwise self-employed. So they pay no PRSI on the occupational pension and 4% on their ARF drawdown. If they are taking the minimum 4% pa from the ARF then their PRSI contribution will often be well below the €500 min for Class S PRSI. I don't know if such contributions have any value or how they count on the PRSI record.


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## jpd (24 Aug 2020)

Sorry, I do not know the answer to that - but a question was asked in the Dail in 2018 https://www.oireachtas.ie/en/debates/question/2018-11-21/241/#pq-answers-241

Q. *Deputy Michael McGrath* asked the *Minister for Employment Affairs and Social Protection* the class of PRSI paid by persons under 66 years of age in respect of income from an approved retirement fund; if such PRSI paid is reckonable for the purposes of the State pension (contributory); and if she will make a statement on the matter. [48608/18]
Written answer:
Approved retirement funds or ARFs are funds managed by a qualifying fund manager into which an individual may invest the proceeds of their pension fund when they retire. The income and gains of such funds are exempt from tax within the fund. Any amounts withdrawn from an ARF are referred to as a distribution. A distribution is treated as income from an employment. It is subject to income tax and the fund manager must operate the PAYE system on it.

Under social welfare legislation any payments received by way of pension are not regarded as reckonable emoluments for the purposes of self-employed pay related social insurance (PRSI). However, unlike annuity products, ARFs are not pensions but are treated as assets. Distributions from ARFs fall within the charge to Class S self-employed PRSI, or if the recipient of the distribution is a modified class contributor, Class K.  Class S contributions may be used to qualify for the State pension (contributory). Class K PRSI contributions do not give entitlements to any social insurance benefits.

Does that help?


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## Early Riser (24 Aug 2020)

Thanks. But I am still unclear. As I reckon that the PRSI payable on the majority of ARF drawdowns are below the €500 minimum I do not know how they are counted towards the PRSI record for State Pension purposes. I would be surprised that a payment of €100 pa (let's say) Class S on an ARF would count for 52 weeks PRSI record. I suspect that it may carry no value - but I don't know.


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## fayf (24 Aug 2020)

In order to continue to be credited with an. annual 52  Insurable weeks, while drawing from the ARF, you need to be drawing a minimum of €12,500 per annum, which will result in the minimum annual PRSI amount of €500. Eg 12,500 @4%. This is the minimum requirement, and will count towards the state contributory pension, Class S PRSI.

If the ARF annual drawdown is less than that, you won’t be credited with 52 insurable weeks per year (or stamps).
There are however, ways of “buying” insurable weeks, if your drawdown does not meet this criteria, you can make up the shortfall, between the PRSI you do pay on your ARF, and the €500 annual amount.

check here :





						PRSI - Pay Related Social Insurance
					






					www.gov.ie
				




Of course, the aim of all of this is to hit the target, of an average of 48 Insurable weeks(to be eligible for the max contributory pension), since you started working, up until age 66.So getting a statement now, of contributions from DSP will assist, with where you currently stand, and you can plan accordingly.

PRSI Operational Guidelines





						Operational Guidelines: State Pension Contributory
					






					www.gov.ie


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## Early Riser (25 Aug 2020)

fayf said:


> There are however, ways of “buying” insurable weeks, if your drawdown does not meet this criteria, you can make up the shortfall, between the PRSI you do pay on your ARF, and the €500 annual amount.


 
Thanks. So it is possible to top it up with voluntary contributions. That is good to know. I doubt if many people who are covering the 4% imputed distribution will be drawing down €12,500 (or near it) from their ARF between 60 and 66.

Of course, some will be covering their PRSI record in other ways, eg, employment, self-employment or credited contributions. And, if self-employed or a landlord, I guess the ARF PRSI would go towards the €500 minimum.


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## Coldwarrior (25 Aug 2020)

fayf said:


> Of course, the aim of all of this is to hit the target, of an average of 48 Insurable weeks(to be eligible for the max contributory pension), since you started working, up until age 66


Moving slightly away from the topic and I know this system is supposed to change to total contributions in the next couple of years, but is it currently the case that the average of 48 insurable weeks is calculated over *every* year since a person first started work and paying tax? Even if you work for more than 40 years? 
I got my PRSI contribution statement recently and I've lots of years where I worked a summer job as a teenager etc with only 10 - 12 insurable weeks, sounds like anyone who did any similar work in their youth would be massively disadvantaged by this.


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## Protocol (25 Aug 2020)

Correct, the average conts approach hurts people who started paying PRSI early, and then had breaks in their record.

A foreigner could arrive here age 54, pay 12 years PRSI, 12*52 conts, and then get a full pension at age 66/67, as the calculations are based on the average across the PRSI life.

Denominator = 12.


If you pay PRSI age 16, and then finish age 66, the denominator is 50.

It took me a while to realise this.


Most people don't know this.


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## fayf (25 Aug 2020)

Coldwarrior said:


> Moving slightly away from the topic and I know this system is supposed to change to total contributions in the next couple of years, but is it currently the case that the average of 48 insurable weeks is calculated over *every* year since a person first started work and paying tax? Even if you work for more than 40 years?
> I got my PRSI contribution statement recently and I've lots of years where I worked a summer job as a teenager etc with only 10 - 12 insurable weeks, sounds like anyone who did any similar work in their youth would be massively disadvantaged by this.



Agreed, there are a number of strange and unfair anomolies, which may/may not be  addressed in the short term.

In the meantime,its important to plan now, get your statement, get advice, get help understanding the statement from DSP, and make the correct choices for you- now, be it-making voluntary contributions and /or working longer and/or making ARF withdrawals earlier than you might have originally planned, to keep these contributions going. Or, a combination of the above.


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## Early Riser (25 Aug 2020)

fayf said:


> now, be it-making voluntary contributions and /or working longer and/or making ARF withdrawals earlier than you might have originally planned, to keep these contributions going. Or, a combination of the above.



Or you may be eligible for credited contributions. This will also maintain your PRSI record. Of course you will still be paying the PRSI on any ARF withdrawals - which will likely be below the €500 threshold, so won't count. But the important thing is maintaining the record.


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## bstop (9 Dec 2020)

fayf said:


> In order to continue to be credited with an. annual 52 Insurable weeks, while drawing from the ARF, you need to be drawing a minimum of €12,500 per annum, which will result in the minimum annual PRSI amount of €500. Eg 12,500 @4%. This is the minimum requirement, and will count towards the state contributory pension, Class S PRSI.



Is that statement correct ?

I had ARF withdrawals of 7500 euro in 2019 and have 52 S contributions showing as 52 Paid Reckonable Contributions on my PRSI contribution statement


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## fayf (10 Dec 2020)

https://www.gov.ie/en/publication/8...yed-Contributions.aspx#prsi-for-self-employed[/URL]

€500 is the minimum per annum, according to the above. It might be worth checking in relation to where there is a shortfall, eg your case, where it appears there is a shortfall of €200 for 2019. 

You have an option of paying the difference. Perhaps contact the department for clarification, and find out out to pay any differencr, to avoid any future surprises.


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## asdfg (10 Dec 2020)

Afaik you can go back 5 years after retirement to amend your prsi record so if you retire at 60 you can wait till your 65 or nearly 65 then contact the prsi section and amend your prsi contributions if necessary. Might not be a bad idea in light of the new system for state contributary pensions expected to be introduced in the next few years


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## bstop (10 Dec 2020)

fayf said:


> https://www.gov.ie/en/publication/8...yed-Contributions.aspx#prsi-for-self-employed[/URL]



That quote refers to self employed income.

The income from an ARF is PAYE income paid by an employer ( The employer being the company operating the ARF ). The employer deductes PAYE USC and PRSI class S at source. There is one class S PRSI deduction per week deducted at 4 %. At the end of the year, if monthly payments are made there will be 52 S class contributions made. These are reckonable for state pension.
I cannot find any reference from any ARF provider stating that PRSI is not deducted from an ARF smaller than 12500 euro per year.


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## fayf (10 Dec 2020)

For PAYE purposes ARF withdrawals are taxed as normal, the ARF provider is effectively, the employer.

For PRSI purposes, ARF withdrawals are effectively Income from Investments, and therefore subject to class S PRSI.

Contact the department for further clarification on the €500 minimum payment. All ARF withdrawals are subject to 4% Class S PRSI deductions, irrespective of the annual amount.


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## bstop (12 Dec 2020)

ARF withdrawals are treated as earned income for PRSI .


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## SGWidow (12 Dec 2020)

What happens if your ARF withdrawals are below the PRSI threshold?

Is the threshold an annual amount - i.e. if one takes €10k out in one go, must you pay PRSI on it?


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## jpd (12 Dec 2020)

fayf said:


> For PAYE purposes ARF withdrawals are taxed as normal, the ARF provider is effectively, the employer.
> 
> For PRSI purposes, ARF withdrawals are effectively Income from Investments, and therefore subject to class S PRSI.





bstop said:


> ARF withdrawals are treated as earned income for PRSI .



Only one of the above can be true - are ARF withdrawals earned income or un-earned income?


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## Early Riser (12 Dec 2020)

jpd said:


> Only one of the above can be true - are ARF withdrawals earned income or un-earned income?



It is a "distribution"!

_"Any amounts withdrawn from an ARF are referred to as a distribution. A distribution is treated as income from an employment. It is subject to income tax and the fund manager must operate the PAYE system on it.

*Under social welfare legislation* any payments received by way of pension are not regarded as reckonable emoluments for the purposes of self-employed pay related social insurance (PRSI). However, unlike annuity products, *ARFs are not pensions but are treated as assets*. *Distributions from ARFs fall within the charge to Class S self-employed PRSI, or if the recipient of the distribution is a modified class contributor, Class K.  Class S contributions may be used to qualify for the State pension (contributory). Class K PRSI contributions do not give entitlements to any social insurance benefits.*"








						Social Insurance
					

Social Insurance Dáil Éireann Debate, Wednesday - 21 November 2018



					www.oireachtas.ie
				



_


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## fayf (12 Dec 2020)

SGWidow said:


> What happens if your ARF withdrawals are below the PRSI threshold?
> 
> Is the threshold an annual amount - i.e. if one takes €10k out in one go, must you pay PRSI on it?


Class S PRSI applies to all ARF withdrawals, there is no threshold for Class S. There are thresholds for other PRSI classes, but not Class S.
So to the question, the answer is yes, you pay 4 % Class S PRSI on all ARF withdrawals. The annual amount is irelevant.

See page 19 of this guide, where it confirms “All Income” is charged at 4 % for Class S, (eg no threshold)in this case, ARF withdrawals are classed as Income From Investments.


			https://assets.gov.ie/11117/6beb1ad2f51346f4ad6f27db1c473e59.pdf


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## bstop (16 Dec 2020)

Having checked income details for 2020 on ROS this is how prsi S class is added for ARF distributions.

If the distribution is over 12500 euro 52 S class prsi contributions are allowed on a single yearly drawdown.

If the distribution is less than 12500 euro you will need to make monthly drawdowns to get the 52 S class prsi contributions.


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## fayf (16 Dec 2020)

bstop said:


> Having checked income details for 2020 on ROS this is how prsi S class is added for ARF distributions.
> 
> If the distribution is over 12500 euro 52 S class prsi contributions are allowed on a single yearly drawdown.
> 
> If the distribution is less than 12500 euro you will need to make monthly drawdowns to get the 52 S class prsi contributions.


Just curious, you had indicated in an earlier post, that your ARF withdrawals were well under 12,500, but you were still getting 52 weeks class S stamps, how does that link up with what you say above ?


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## bstop (16 Dec 2020)

My ARF drawdown is less than 12500 and my wife's is more than 12500 per year . My wife had one drawdown for the year and got 52 S contributions. This year I suspended monthly drawdowns for a few months due to the collapse in stock markets caused by covid 19. I had 9 monthly drawdowns and got 40 S contributions. I had 12 monthly drawdowns last year and got 52 S contributions. 

Basically if your ARF is less than 12500 you need to make monthly drawdowns to maximize S class contributions.


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## murphaph1 (27 Nov 2021)

This is pretty amazing if true (which it certainly seems to be).

I'm 43 and I always wanted to retire at 50 but with Covid etc. I'm thinking I might just enjoy life and finish up now. I have 13 * 52 reckonable contributions (I have an up to date statement from the DSP). I left Ireland to work in Germany and so I was prohibited from paying PRSI during my working life here. Now that I am  not working (I have rental income in both countries) I am looking to make _voluntary_ PRSI contributions and have completed a VC1 form and have been admitted as a voluntary contributor, though I am yet to hear back on how _much_ they expect me to contribute.

I have a modest occupational pension fund in Ireland (currently valued at 100k) and I was going to take an annuity to have PAYE income so that I am entitled to the PAYE (Employee) Tax Credit (to reduce my rental income tax bill in Ireland) but then I saw that A(M?)RF distributions are considered PAYE income as well and so I was thinking I could take out the _smallest_ annuity possible (to entitle me to the Employee tax credit until my death) and also take AMRF distributions monthly to receive 52 PRSI Class S (reckonable) contributions instead of paying at least €500 in voluntary contributions. The annuity is a pension and therefore appears to not bring any reckonable PRSI contributions, whereas the AMRF does?

Does this sound like a reasonable plan or are there gaping holes in it?

It may well be that the DSP says I have to pay PRSI on my Irish rental income if I want to voluntarily contribute at all. I am waiting for feedback from them there. It's a bit confusing as I am not _obliged_ to pay PRSI on that rental income as I am non-resident (and I was actually prohibited from paying PRSI while employed in Germany as it was socially insured employment in another EU state) but now I want to voluntarily pay PRSI. I am unsure if the DSP will allow me to pay the €500 minimum or will insist that I just pay 4% or whatever it is on my Irish rental income.

An option possibly open to me is to grant my wife a limited interest (until I'm say 67) in my Irish property so that the rental income would be hers and not mine. Irish rental income is NOT taxable in Germany and does not even need to be declared in the tax return. We are jointly assessed here anyway.


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## NoRegretsCoyote (28 Nov 2021)

@murphaph1

You can only make voluntary contributions if you left Ireland within the last five years.

I'm pretty certain that you are not allowed to pay Class S on your Irish rental income as you are non resident. So your only option is voluntary contributions.


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## murphaph1 (28 Nov 2021)

Hi NoRegrets. In fact I can make voluntary contributions if I left socially insured employment in the EU in the last 5 years and having the minimum of (I think) 520 reckonable contributions in Ireland. I already have that much in writing (twice, once by email and now in a letter). My time in Germany in socially insured employment is counted as if I were still in socially insured employment in Ireland so to speak. So voluntary contributions are definitely possible in a case like mine. I have already been accepted as a voluntary contributor based on these facts and having submitted VC1 with a copy of my German social insurance record (as requested by the department in the initial email response to my query).

If rental income PRSI contributions cannot be made at class S as a non resident, then this is a good thing as it would be well over the €500 minimum contribution I'd likely be assessed for as a simple voluntary contributor. Clearly I want to pay as little as possible for my reckonable contributions and as we are likely to be under a total contributions approach by the time I reach 67 or 68 then it makes sense to start paying in now already and not waiting the 5 years out. Under a TCA I guess each €500 contribution would be worth roughly 1/40 of the contributory pension so you'd get all your contributions back in 18 months and even if I die prematurely, it would entitle my wife to a far better survivor's pension than in Germany.

I'm more curious about the annuity + AMRF "trick" I mentioned above but on rereading my own post I see an error. I don't need the annuity to death to claim the PAYE tax credit. The DSP pension entitles me to that credit already once I reach pensionable age. I just need to use the AMRF income to allow me to claim it from age 50 already.

If the PRSI paid on the AMRF income (taken monthly) entitles one to 52 reckonable contributions then I could cease voluntary contributions in 7 years already and still receive those reckonable contributions. I'd like to hear if anyone else can confirm that (sub €500) PRSI paid on AMRF income (taken monthly) does indeed result in 52 reckonable contributions appearing on your record.


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