# Changes to rules for ARFs in BUdget 2011



## squaw (11 Dec 2010)

I have a number of questions regarding how ARF work and the rules around them:

1. Are the changes to the rules for ARFs still a proposal or have they been brought in?

2. Do these new thresholds apply individually or jointly i.e. if myself and my husband have separate pension policies, but we are jointly assessed for tax at present and we probably be joint assessed on retirement, are the pension pots added together for married couples choosing joint assessment.

3. When the policies mature can they be merged together.

4. What is considered as Other Annual INcome. State pension I presume. Is rental Income or income from an Annuity considered as guaranteed income?

5. Do we both need to have a pension income of 18k or both have the ability to put 120k into and ARMF.

The reason I ask all these questions is that given recent losses on our pension funds and the availability t top up getting less, with declining wages, I am afraid that our only option will be an Annunity, which is what I wanted to avoid.

Also my pension pot will be bigger than my spouse's so I am just trying to figure out in advance what our options are going to be if say I have a 200k in my various pensions and he had 100k.


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## voodoobazza (12 Dec 2010)

1. The rules have been brought in
2. You each now have a separate Standard Fund Threshold, you are not jointly assessed on your retirment pots as you might decide to retire at different ages.
3. On retirement you will have 2 separate ARFs or Annuities depending on which route you chose, they will not be merged.
4. Rental income for this purposes is not considered guaranteed income whereas the state pension is.
5. There is an interim arrangement for the next 3 years where you can still use the AMRF and put 63,500 into an AMRF to avoid annuity purchase. If you are retiring later then the next 3 years the new rules apply, Ie annuity income of 18K which will cost circa €360K to purchase.
Dont write off annuities as the purpose of a retirement fund is to provide income in retirement. At a certain point annuities are essential however if you do not need to draw from your retirement pot and use other sources of income in retirement the ARF might be best for you.
Go get some fee based independent advice on your current situation and your options ahead. Planning at or around the point of Retirement is the most crucial thing you can do.
Your last point would lead me back to my last point.
Get some advice from a fee based advisor who is qualified and knows what they are talking about.


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## squaw (12 Dec 2010)

Thanks for reply.
I am just so annoyed. Surely there has to be some form of contract law that applies here. What I mean by this is. 
If we decide on a certain course of action and enter into what we consider is a contract with the pension company based on revenue info, surely the revenue rules that applied at the time we took these various actions should be upheld. Otherwise everyone is constantly trying to catch up on a moving train in that these thresholds could be moved upwards again.

Surely we should have control over what we do. After all it is OUR MONEY.

Have another 15 years to go and had made a financial plan in terms of what to invest in each year and what it might be worth at retirement and also how we would use that money based on the 25% tax free lump sum and the 12.7k and 63.50 thresholds.

Am seriously considering not putting anything else into any of the pensions as we will not be in a position to meet either requirements and the way I see it now, since our only option will be annuities, it is just throwing good money after bad.


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## bstop (13 Dec 2010)

You can avoid buying an annuity if you invest 120000 euro into an AMRF. The continual changes to long term pension contracts by this government is a disgrace and would discourage anybody from investing for their retirement. I signed up to a PRSA with quoted retirement options and terms but it seems that they are not worth the paper they are written on.


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## squaw (13 Dec 2010)

The problem is that individually we will probably not have 120k in each of our funds. (63k was possible but due to losses and declining income over the next few years I do no think we will have that after we take the tax free element. 

I remember when we took out the policies years ago asking if there was any difference between only one of us having a policy and both of us and think we were told no. But clearly there is since the funds are not merged according to the info given above. 

Is it possibly to have a joint pension?

If you have quoted retirment options surely they should be upheld?

Going to contact the Pensions Board and Ombudsman I think. How can anyone plan for anything when the goal posts keep changing.


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## voodoobazza (13 Dec 2010)

*Long Term Planning*

Since starting work in this area over 11 years ago, I have seen at least 8 material changes to retirement planning legislation. It is a disgrace as one cannot plan for the future with the goal posts moving. The pensions board spout one thing about pension coverage and the government do the other to restrict it.
The changes to personal pensions is quite rediculous when you think most self employed professionals will now end up on the states door step for pension in retirement.
We should look at the KIWISaver model in New Zealand and follow suit.


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## bstop (13 Dec 2010)

At the rate of increase in the amount required to fund an ARMF it will probably 
cost 240000 euro in ten years time when I retire. Why would anybody want to plan ahead under this uncertainty.


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## squaw (13 Dec 2010)

It is interesting that on Saturday's RTE radio programme, Saturday View, Mr O'Cuiv defended a view expressed by Joan Burton that FF had still not delivered on the closing of Property Tax reliefs, by saying that these can not be fully effected since people had invested on the bases of getting certain tax reliefs.

Surely the same applies so to people who invested in their pensions, since they also invested on the basis of the rules of the day.


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## Rumpelstilz (19 Dec 2010)

voodoobazza said:


> 1. The rules have been brought in
> .....If you are retiring later then the next 3 years the new rules apply, Ie annuity income of 18K which will cost circa €360K to purchase.



Where have the new rules been published?


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## Rumpelstilz (19 Dec 2010)

Just found it on revenue.ie/en/press/*budget*/*2011*/pensions-changes.pdf


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## EFLYNNQS (25 Jan 2011)

if you plan on using an ARF then dont plan on living more than 20 years after retirement. The mandatory 5% tax imposition each year means that it is unlikely you
would have any funds remaining after 20 years


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## LDFerguson (25 Jan 2011)

EFLYNNQS said:


> if you plan on using an ARF then dont plan on living more than 20 years after retirement. The mandatory 5% tax imposition each year means that it is unlikely you
> would have any funds remaining after 20 years


 
You're ignoring the fact that there should be some fund growth each year which will offset the 5% deduction. If your ARF averages 5% growth after charges, your ARF would be untouched. I know that's a big IF and depends on fund performances, choice of funds etc.  If your ARF only averages 3% per year after charges, your original capital will only be reducing by 2% each year.


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## Parkview (8 Feb 2011)

Not having all the detals of your existing pension scheme it is difficult to give concrete advice but one option would be to transfer your current fund into a PRSA assuming that the existing one is being wound up and has been in existance for less than 13 years, Then start another pension plan and after it has accumulated transfer it into a PRSA as so on. Then at retirement you can cash in the PRSA's one at a time or as you need the funds. This gives a little more flexability and will avoid the entire pension being subject to the imputed drawdown. The 5% draw down will enevitable out strip the fund, if the fund itself grows by 3%, which would be good, less management charge of 1 - 2.5%....its going to run out.
H


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