Negotiating the ARF potholes...

[Setforlife]

Yes, the question was ‘can’ you not take the 4% and you certainly ‘can’. Whether it is advisable is another thing, it appears there are a non zero number of circumstances where it could make sense, but not for most people or most situations.

It’s is a consideration for people to think about pre early retirement for example, if not needing the 4% of their fund yearly, to not create a situation where the imputed distribution is on their entire pension fund. Eg by more careful planning around how to structure your fund than putting it in one big arf, for example by creating multiple PRSAs that are then not vested at the same time.

 

[kierane]

Hi, a question that I have struggled getting a clear answer.
If you are lucky enough to have a fund greater than €2m at retirement, say €2.1m, and you take €200k lump sum and pay whatever excess tax, with the remaining fund of c. €1.9m, is imputed distribution calculated on the fund after the lump sum taken out or before? (In may case, I would probably want to avoid the 6% distribution rate).

 

[ClubMan]

Hi, a question that I have struggled getting a clear answer.
If you are lucky enough to have a fund greater than €2m at retirement, say €2.1m, and you take €200k lump sum and pay whatever excess tax, with the remaining fund of c. €1.9m, is imputed distribution calculated on the fund after the lump sum taken out or before? (In may case, I would probably want to avoid the 6% distribution rate).

Surely it's after the tax free lump sum has been taken because it's only after that happens that the remainder of the fund is used to invest in an ARF?

 

[kierane]

Surely it's after the tax free lump sum has been taken because it's only after that happens that the remainder of the fund is used to invest in an ARF?

Thank you - That's what I am hoping but I have noted some people talk about (Pension) Funds and ARFs and don't differentiate between pre-and post-lump sum.......

 

[ClubMan]

Thank you - That's what I am hoping but I have noted some people talk about (Pension) Funds and ARFs and don't differentiate between pre-and post-lump sum.......

Any use?

https://www.revenue.ie/en/tax-professionals/tdm/pensions/chapter-28.pdf

By the time that the ARF has been set up the TFLS has been deducted.

 

[kierane]

Any use?

https://www.revenue.ie/en/tax-professionals/tdm/pensions/chapter-28.pdf

View attachment 9688

By the time that the ARF has been set up the TFLS has been deducted.

That certainly looks like the nugget I was searching for! I think it is a clear answer at last - the fog is lifting. Thank you.

 

[Fortune]

Hi, a question that I have struggled getting a clear answer.
If you are lucky enough to have a fund greater than €2m at retirement, say €2.1m, and you take €200k lump sum and pay whatever excess tax, with the remaining fund of c. €1.9m, is imputed distribution calculated on the fund after the lump sum taken out or before? (In may case, I would probably want to avoid the 6% distribution rate).

In this case, one would take a lump sum greater than €200k, and the tax paid on the next 300k of lump sum is offset against the chargeable excess tax.

The size of the pensions fund and lump sum have no effect on the imputed distribution, only the ARF value at the valuation date matters.

 

[kierane]

In this case, one would take a lump sum greater than €200k, and the tax paid on the next 300k of lump sum is offset against the chargeable excess tax.

The size of the pensions fund and lump sum have no effect on the imputed distribution, only the ARF value at the valuation date matters.

Thanks! ClubMan's response and the extra lump sum would solve this "problem"!