Imputed distribution on ARF in year of retirement

[outofmymind]

Just wondering how imputed distribution works in the year of retirement. e.g. if you retire in January you would expect to draw some pension that year so there is no issue, but if you retire in say Oct/Nov/Dec you have already probably earned what you would hope to spend in a year and a distribution at that stage would be taxed at the marginal rate and would needlessly deplete the pot. Or does imputed distribution only kick in during the first full year of retirement? Thank

 

[fayf]

My understanding is this is cut and dry. If you have an ARF, the inputed distribution kicks in, in the year you reach 61 years old. So if you are retiring in that year, it may be prudent to delay transferring from DC to an ARF, if your 61st birthday, is in the 2nd half of the calendar year.

Tax on ARFs

Any amounts drawn down from an Approved Retirement Fund (ARF) are taxed as income and are also subject to the Universal Social Charge...

www.pensionsauthority.ie

Of course, if you are retiring in a year, prior to reaching age 61, this won’t be a problem, as imputed distribution is not applicable.

 

[LDFerguson]

If, as fayf says, you are in the year you turn 61 or older, you must make a withdrawal or face tax on a notional withdrawal. The ARF is valued at the end of November and that's the value on which the withdrawals are calculated. Even if you only set up the ARF in October, you still have to make the full withdrawal (typically 4%) for the entire year. It's an argument in favour of setting up your ARF at the start of a year.

 

[outofmymind]

Public service, post 2004 pre 2013, so a db scheme with avcs. I thought you had to convert avcs to arf straight away, but it sounds like it is possible to leave them till the following year? Is that correct? Edit.... planning cner

 

[Conan]

Public service, post 2004 pre 2013, so a db scheme with avcs. I thought you had to convert avcs to arf straight away, but it sounds like it is possible to leave them till the following year? Is that correct? Edit.... planning cner

No. If its an AVC connected to your main scheme then you must activate at the time you access your main scheme benefits.

 

[outofmymind]

Thanks for that @Conan

 

[asdfg]

Could be wrong But you don't have to convert the avc to an arf on retirement

 

[outofmymind]

There seems to be some confusion here. @Conan and @LDFerguson, I know you are both in that line of work - can you clarify? Is there maybe a difference between avcs for a current employee and a former employee? Or maybe employee or self employed? Or db vs dc? Or is there some other reason why this issue seems to be confusing? Thanks all

 

[Steven Barrett]

There seems to be some confusion here. @Conan and @LDFerguson, I know you are both in that line of work - can you clarify? Is there maybe a difference between avcs for a current employee and a former employee? Or maybe employee or self employed? Or db vs dc? Or is there some other reason why this issue seems to be confusing? Thanks all

AVC's are linked to an employer scheme so when you mature the employer scheme, you have to mature the AVC's at the same time.


With your ARF, if you mature it after 30 November in any given year, there is no imputed distribution in that year. Otherwise, if you are age 61 or older, there is imputed distribution in the year of maturity.


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

 

[Early Riser]

@outofmymind

You have to mature the AVC fund at point of retirement (with pension). But there may well be a time lag between date of retirement and date of commencement of the ARF. In my own case I was neither trying to delay nor rush the commencement date. But there was almost a 4 month lag (retired September and ARF commenced January). If I had been trying to I probably could have delayed things a bit further.

 

[LDFerguson]

There seems to be some confusion here. @Conan and @LDFerguson, I know you are both in that line of work - can you clarify? Is there maybe a difference between avcs for a current employee and a former employee? Or maybe employee or self employed? Or db vs dc? Or is there some other reason why this issue seems to be confusing? Thanks all

I wasn't aware from your original post that you were referring to an AVC. If it's a private pension fund then you have discretion as to what time of year you set up your ARF. As it's an AVC, as per previous posts, it must be dealt with at the same time as you are drawing your benefits from the main pension scheme. @Early Riser and @Steven Barrett make good points about the practicalities of this - the process of setting up an ARF can often take months anyway. So realistically if you are drawing your benefits from the main pension scheme in the last three months of a year, it may well be after 30th November by the time the ARF is set up, meaning that imputed distributions won't be an issue until the next year.

Hope this clarifies.

 

[outofmymind]

Thanks everyone for the clarifications.