AMRFs

D

Dan Murray

Guest
Apologies in advance......serious senior moment!!!!

If I have €63,500 in an AMRF and it grows to say €80,000 and I don't take any money out of the AMRF - (I'm under 75!) - is that ok??

(where I'm getting confused is that I thought the AMRF limit was €63,500 and people who previously had money in AMRFs a few years ago - when the Rules changed - had money transferred out of the AMRF into an ARF......or have I completely lost the plot here??)

Apologies again!
 
In relation to your €63,500 AMRF, you may now withdraw up to 4pc of the value of the assets of the AMRF each year, subject to taxation at the marginal rate and regardless of the AMRF value. This withdrawal is voluntary and does not have to be taken. You were previously only allowed to withdraw the income or gains from the original capital invested into the AMRF up to age 75. This 4pc may add €2,540 to your income but depending on how your AMRF fund performs, this 4pc may also reduce the value of this fund so you should revisit your financial adviser to discuss this.

Where your ARF value is less than €2m and you are aged 61 to 70, you must withdraw 4pc per year. This is called imputed distribution. This has reduced from 5pc per year but it remains at 5pc if you are aged 71 years or over. Also, if your ARF fund is valued at over €2 million, then the 6pc annual imputed distribution still remains in place.
 
Thanks very much 44brendan

Your explanations are very clear.....I'm just having a slow day......medication issues, I'm afraid. I actually used to know this stuff..........worrying signs...........aaaaggh??!!

Regarding the imputed distribution over €2m - it's on the full fund, isn't it? i.e. if the ARF is €3m, it's 6% on the lot - not 6% on €1m and 4% on €2m
 

The AMRF requirement did increase to €119,800. Then the Revenue realised that they were doing themselves out of tax income, so they reduced it back down to €63,500. If you took out an AMRF at €119,800, they took €56,300 out of your AMRF and put it in an ARF, so you only had €63,500 in the AMRF.

It was supposed to revert back to €119,800 in this Finance Act but surprise, surprise, it hasn't. They should get rid of it altogether, it has absolutely no purpose.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 

Technically, this is not correct. You do not have to withdraw anything from your ARF. If you chose not to take anything, the Revenue will take the tax due on 4% of the value of your ARF directly out of your fund.

As the remainder is therefore taxable again, I have never come across someone who has taken this option. Everyone takes the money out.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
Thanks Stephen

In relation to your first post - thanks - this was where I was getting all fuzzy. (In particular, my AMRF had grown to something like €150k and my recollection now is that 63.5/119.8 * €150k remained in the AMRF, with the balance being transferred to my ARF).

In relation to your second post - I am going to defend 44brendan. Of course, what you have written is technically more accurate! but 44brendan was replying to a confused oul' codger and simply left out a 4 syllable word rather than confuse the issue.........i.e. he could have said.....you must effectively withdraw 4% (or 6%) p.a.!!

I certainly agree that the AMRF is mighty strange. I remember being invited to the IAPF dinner (possibly in the previous Millennium?) when the whole ARF thing was being introduced by Charlie McCreevy - it was a panic because at the table I was at was the head lad from the Revenue (who had come up with this concept), whilst the head man at the IAPF went on a complete rampage about how inappropriate the income drawdown approach was. McCreevy had figured that if people had been sensible enough to save for their retirement, they should be allowed to apply their savings as they thought appropriate (no surprise there) and called those like the IAPF who were opposed to the measure - nannies. I'm rambling on - but in summary, AMRFs were introduced to appease the nannies. It's a Revenue measure which the Revenue never intended or wanted. But it brings us back to the old story about pensions in this country - as Kissinger put it - who do I call if I want to speak to Europe?
 
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I was being pedantic on the imputed distribution bit. Everyone refers to you "having to draw down 4%". Many years ago when I was learning my trade, I was constantly corrected when making points in reports that were not wholly accurate, such as the 4% draw down. Another one I used to get pulled up on was if you don't have a guaranteed income of €12,700, you have to put €63,500 into an AMRF. You don't. You can use the €63,500 to purchase an annuity instead. Of course, no one ever does this...

I heard that story alright about the IAPF lobbying. The thing is, the ARF was introduced in 1999. We have enough data on ARF's holders spending patterns to see that they haven't been drawing down all their money and spending it on yachts and sports cars. In fact, they have been very prudent with their money. So the IAPF's fears are completely baseless. The AMRF was sold by McCreevy as holding an emergency fund so retiree's weren't destitute in old age. No mention of what they were supposed to do until they reached 75 when they could access their initial capital.

I once had a case of a man with a terminal illness who obviously didn't want to purchase an annuity. The Revenue had no discretion to waive the AMRF requirement, even though this man had no chance of seeing age 75.

Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
Thanks' Dan! I will certainly defer to Steven on the technicality given his practitioner experience
 
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