# Conditions for an ARF



## Rumpelstilz (12 Feb 2006)

To qualify for an ARF one must have [FONT=Verdana, Arial, Helvetica, sans-serif]a "guaranteed income of € 12,500 a year". This means a pensioner on an maximum Old Age Contributory/Non-Contributory Pension with a qualified adult automatically qualifies for an ARF (322.10 x 52 = 16749 or 302.30 x 52 = 15720 minimum per year). Is this correct? 
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## Jimbob2 (13 Feb 2006)

You need to clarify your question. Are you pre or post retirement from your pension? If pre, what employment status are you? i.e. self employed, employee, company director?

The requirement for a guaranteed income of €12,500 relates to those who have already qualified to take the ARF/AMRF route at retirement. If you do not have a guaranteed income of €12,500 you must set aside €63,500 in an Approved Minimum Retirment Fund (AMRF) until you are 75 but may access any growth in the fund over and above €63,500.

If you do have a guaranteed income of €12,500 you may invest the non-tax free portion of you fund in an Approved Retirment Fund (ARF) or cash the whole lot in paying 42% tax on it.

But the rules pertaining to whether or not you can take up the ARF/AMRF options at retirement are determined by the type of pension scheme/employment you are in at the time of retirement. Can you post more details?


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## Rumpelstilz (13 Feb 2006)

Hi Jimbob2,

I am self-employed and I expect to retire in about 11 years. So the question isn't really urgent and a lot of things can happen in the next ten years (e.g. this € 12,500 limit might be increased). But if I retired today (let's say at the age of 66) and if I had enough PRSI contributions to qualify for a maximum OAP of € 16,749 per year, this would mean I could put all savings from my Personal Pension Fund into an ARF. 

Now let's presume my wife was working when I retired. My OAP would then be € 193.3 x 52 = 10,052 per year. So if I had no other income I would not qualify for an ARF. Or I could buy an annuity with parts of my pension fund to reach the 12,500 limit and could put the reminder into an ARF. Is this correct?


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## Jimbob2 (14 Feb 2006)

No. If you currently have a personal pension and you continue to have a personal pension until you retire in 11 years time you will be eligible to take out an ARF. This has nothing to do with the guaranteed income. 

At present non-shareholding directors (employees) in company pension schemes are not eligible for ARF (apart from AVCs). 

When you decide to access your pension benefits (any time from age 60 and you don't have to stop working) you get 25% of the fund tax free. The rest can either be invested in an ARF/AMRF or an annuity.

If you choose the ARF route and you have a guaranteed income of €12,500 you can invest all of the money in an ARF and access as much or as little of it, as and when you like from day one, paying your marginal rate of tax on draw down. On death the remaining fund passes to your estate.

If you do not have a guaranteed income of €12,500 you still qualify for an ARF, you just must put €63,500 into an AMRF, the captital of which must remain intact until you reach the age of 75 at which point it becomes and ARF and is fully accessible. In the menatime you may draw down any groeth over and above €63,500 that the AMRF acheives - again paying your marginal rate of tax and it too passes to your estate on death. Anything left in your pension fund, after your tax free lump sum has been taken and €63,500 has been invested in an AMRF, is invested in an ARF.

Who said pensions are complicated??


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## Friday (15 Feb 2006)

You can only take into account your own State Pension benefit. They will not accept the dependents allowance in calculating the minimum guaranteed income.


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## voodoobazza (16 Feb 2006)

If you are self employed, why would you wish to ARF all  your Personal Pension policies, you can draw on some of them, if you die the Personal pensions become your spouses direct inheritance .....no tax.

If you ARF the monies and then Die your spouse will pay tax on the drawdown at her marginal rate......


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## Rumpelstilz (20 Feb 2006)

Hi Friday,

Thanks for this information, I didn't find this anywhere. By the way who are "they"? 

Quote: "They will not accept the dependents allowance in calculating the minimum guaranteed income"


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## thatbeatsall (19 Oct 2006)

Speaking of ARFs, has anyone found a decent ARF with investment options that generate decent income?


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## boaber (20 Oct 2006)

Just when you thought you got to grips with ARFs, the Finance Act 2006 
imposed a system of 'imputed' or mandatory distributions on ARFs established on or after 6th April 2000.

The QFM will be obliged to operate PAYE on the imputed distribution, and deduct from the ARF the resulting tax due.
 
The imputed distribution does not apply to ARFs where the ARF holder is under age 60.
The rate of imputed distribution will be as follows:
1% on January 2008, based on the value of the ARF at 31st December 2007,
2% on January 2009, based on the value of the ARF at 31st December 2008, and
3% on January 2010, based on the value of the ARF at 31st December 2009, and
3% each subsequent January based on the value of the ARF at the preceding 31st December.

The amount subject to the imputed distribution is reduced by the level of any gross withdrawals taken from the ARF during the preceding year.

Seems a bit unfair to effectively force people to take an income from their ARF every year, but I understand why it was brougt in.


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