# Pension PRSA to ARF process



## monagt (16 Aug 2009)

How does one actually get an ARF.

 I have a PRSA with a large Irish Life and when I ring up for options I get sent a general Brochure.

I do not want to meet one of their advisors but I want access to a range of Funds as cheap as possible.

Do I need to go to a Financial Advisor? 

Would a company specialising in Pensions be a better way?

Looking at Source: [broken link removed] 

I would like access the funds there in a kind of mix and match basket


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## Marc (16 Aug 2009)

Hi, 

Have a look at this discussion around the importance of establishing a trust-based ARF rather than an Insurance Company scheme:

http://www.askaboutmoney.com/showthread.php?p=884263#post884263


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## Conan (17 Aug 2009)

monagt,
For clarity:

A PRSA is a vehicle used to accumulate assets in the pre-retirement period - say up to age 65
An ARF is a post-retirement vehicle, into which you would transfer your PRSA fund on retirement.
It is not clear from your post what you are trying to do. Are you about to retire? Or are you just looking for a different range of investment funds within your PRSA?

Conan


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## monagt (17 Aug 2009)

Yes about to retire end year, prsa in consensus, qualified for a
for arf as other pension, so need to get prsa into cheap mgr fee arf as cheaply as possible


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## GSheehy (17 Aug 2009)

Will you need to draw an income from the ARF?

Not sure what your specific circumstances are but, it may be possible to take your tax free cash and leave the balance in a 'vested PRSA', thus avoiding any transfer/set-up charges and the annual imputed distribution (income) of 3% of the ARF value.


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## monagt (17 Aug 2009)

Will you need to draw an income from the ARF? - YES
Also intend to take 25% Cash

'vested PRSA' What are the Advantages over ARF as I have never heard of it.

Also, say ARF == 120K - take 20k so left 100k @ 4 % - 1% fees == 3% - Is it possible to get 5K pa without running down your fund?


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## GSheehy (19 Aug 2009)

monagt said:


> 'vested PRSA' What are the Advantages over ARF as I have never heard of it.


 
It's really only suitable if you do not intend taking income from the remaining fund after tax-free cash. The advantage over an ARF, in these circumstances, would be that you are not compelled to take the minimum imputed distribution, and possibly pay tax on the distribution.



> Also, say ARF == 120K - take 20k so left 100k @ 4 % - 1% fees == 3% - Is it possible to get 5K pa without running down your fund?


 
Guaranteed? I don't think so.


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## monagt (19 Aug 2009)

so 100k gives you Approx. 3k taxable Leviable income if you do want run down your fund? I prsume if you allow for 30 years and cover for inflation you could have some drawdown of capital as well?
And to reiterate the advice always is to take max cash tax free?


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## GSheehy (19 Aug 2009)

monagt said:


> so 100k gives you Approx. 3k taxable Leviable income if you do want run down your fund?


 
If the fund you invest in does not achieve a return of 3% (+ charges) then you will 'run down' the fund. 

There is more information[broken link removed] on 'imputed distribution'


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## monagt (19 Aug 2009)

Thx G. 
I am totally confused. 100k will only get you approx 3k in taxable income (assuming fund makes 4%)

I wonder are many private defined contribution pensioners heading into penury in Ireland?

MMMM


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## Conan (19 Aug 2009)

monagt,
On retirement you can use the PRSA fund to either:

Buy an annuity (a guaranteed income for life), or
Invest in an ARF
If you buy an annuity, the income you get will be a function of your age (therefore your expected lifespan), the type of pension you buy (whether it is payable on your life only, whether it continues to a surviving spouse, whether it is indexed etc). The annuity could range from as low as 3% p.a. of the capital to perhaps 7% or 8% p.a.
If you invest in an ARF, the investment growth will depend on how the funds are invested (asset allocation, risk profile etc). But do not confuse this with the amount of income that you can draw down from the ARF. You can draw down any amount you wish (suject to the minimum 3% compulsory drawdown). Clearly if you draw down more than the growth, then you are eating into the capital. If you draw down less than the growth, then the ARF will increase in value. 
Whilst an annuity gives you a fixed and guaranteed income for life, the capital is foregone. The ARF on the other hand allows you to retain control over the capital, to invest the funds in line with your personal risk/return requirement and to draw down an income as you require. The downside is that the ARF could run out of funds whilst you are still alive (depending on how long you live, the rate of investment return and the rate of drawdown).
So the decision as to whether you buy an annuity or invest in an ARF is dependant on how long you intend to live in retirement. The average life expectancy for a male retiring at 65 is now about 20 years. So if you intend to live forever,,,, buy an annuity, if you intend to pass on sooner... invest in an ARF.


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## upport (23 Aug 2009)

Irish Life have an Annuity option that pays guaranteed income for life and on death any remaining value is paid to your estate.


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## monagt (23 Aug 2009)

Thx All ,appreciate the responses


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