# Basic PRSA -> ARF Question



## hichachoc (20 Feb 2011)

Please help:  

I have paid into a PRSA (~€80,000), it's invested a fund with an Irish life assurance company
I've just turned 65
I will have a pension income which means I do not have to buy an AMRF
I know I can take out 25% tax free
I know there are various ARF options : fund, Post Office saving etc etc

Question:

Having taken out my 25% and decided where to invest the balance, who controls the 75%, ie who looks after the money, who makes sure I pay the PAYE on the income or the encashment etc.  Surely I cannot just go to my life assurance company and tell them I'm going to invest in an ARF and ask for a cheque for the full amount?


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## Conan (21 Feb 2011)

When you invest the 75% in an ARF, the ARF provider (typically a Life Assurance Co. or a specialist provider) takes on the role of the Qualifying Fund Manager. The QFM is then responsible for all taxation matters including deducting tax at source on any drawdown you make from the ARF. As a minimum you must now drawdown 5% of the Fund each year.
Please note, that the minimum pension required to avoid an AMRF is now €18,000 p.a.


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## hichachoc (21 Feb 2011)

Thanks for the info.


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## Baracuda (16 Mar 2011)

Why dont you leave the 75% balance in the PRSA and this would avoid the need of buying a ARF. By doing this you will avoid new contract charges and you wont have to pay tax on the imputted distribution charge of 5% and you can withdraw money when you want to rather than when the Revenue want you!!!


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## boaber (25 Mar 2011)

Baracuda said:


> Why dont you leave the 75% balance in the PRSA and this would avoid the need of buying a ARF. By doing this you will avoid new contract charges and you wont have to pay tax on the imputted distribution charge of 5% and you can withdraw money when you want to rather than when the Revenue want you!!!



up until age 75 of course, after which you must exit the PRSA


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## Baracuda (27 Mar 2011)

boaber said:


> up until age 75 of course, after which you must exit the PRSA


How do you make that out??? I think you may be refering to the fact that you must draw down the TFLS before the age of 75

When benefit crystalization happens in a PRSA the PRSA becomes a "post retirement PRSA" and the assets held by it can be held in it indefinitely and not just up to age 75. For further information see pensions board website. I'd post the link but do not have the facility yet.


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## boaber (28 Mar 2011)

Baracuda said:


> How do you make that out??? I think you may be refering to the fact that you must draw down the TFLS before the age of 75



No, I'm not.

Section 24.3 of the Revenue Pensions Manual states:





> There is a facility to take benefits in stages, but a tax free lump sum may only be taken on the first occasion that benefits are taken. *Benefits must be taken before age 75*.


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## Baracuda (28 Mar 2011)

From a technical point of view you are right and it also states this in the LIA Pensions Manual on page 78 but revenue operates on the basis that the Post Retirement PRSA for all intencive proposes is an ARF when benefit crystalization happens and therefore removes the need to set up a new ARF at the age 75. This is further supported by the fact that one of the largest pension companies in Ireland operates this treatment of post retirement PRSA's.

There seems to be a lot of confusion in this area as I advised a client to transfer a PPP to a PRSA with another mayor life company pre 2011 Finance Act and they tried to insist that the remaining balance after TFLS must buy an AMRF/ARF and held up the claim until the 03 of March while seeking Revenue clarification that this could be done and I am still waiting for them to roll back the Entry Date so it will be goverened by the 2010 AMRF/ARF rules


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## browtal (23 Jul 2011)

*Drawing down PRSA Best way*

I am now 66 yrs and a few years ago, when the SSIA were paid out 
I *invested €7,500 in a PRSA scheme *which the *government topped* up to* €10,000* 
an offer that was made at the time, if an investment was made within a limited time period and subject to other conditions.
 I would like to draw it down now from the Insurance Company.
Could anybody tell me the *most tax efficient way* to do this. The policy is now worth €10,600. 
My husband drew down his a few years ago and was *taxed on the full* *amount*, *€7500 which had already been taxed*. I do not understand this and would he be entitled to a refund of any of this tax now 4 years later. I thought he would have been taxed *only on the €2500 which the* *scheme* *contributed*, *plus the growth*.  Would really appreciate some help on this Browtal


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## Baracuda (24 Jul 2011)

You can request Revenue to transfer part of your tax credits and cut off rate to be allocated to the life office for the porposes of claiming your pension.  If it is the case that ye have no other taxable income other than Contributary Pension you can receive up to 36000 tax free per year so this would mean that you would pay no tax on the pension fund

In the case of your husband he can claim tax back for up to 4 years ago providing he had not used his tax bands and credits for that year.


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## browtal (29 Jul 2011)

Baracuda,
Many thanks for advice now working on it. Thanks Browtal


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