I recently heard part of a radio news item about an extra 3% tax to be levied on ARF's which were not drawn down each year after retirement. Has anybody heard of this ?
A bit of bummer and I would say that it is changing the rules retrospectively which I feel is unfair - if you had known of this in advance, then the ARF may not have been your best choice.
If it's any consolation, this seems to be a growing trend in Europe - the French are doing the same thing on long-term life assurance contracts.
Please note that there is not an additional tax of 3% as suggested in your post
The new rule basically means that if you are an ARF holder (i.e. you are retired) then you must draw down a minimum of 3% of the fund each year in the form of income
The new rule was brought in because many of Ireland's wealthiest retired people have ARFs of > €5million and they never draw income from their ARF (because they probably have investment income, rental income etc) and they can pass it tax-free to their estate on their death...Revenue is trying to clamp down on this way of avoiding tax by the very wealthy - it should not really affect most ARF holders (normal people like you and me) because we would normally draw down 3% or more of the fund each year anyway
[FONT=Verdana, Arial] ..............The current Finance Act has a provision which taxes retirement funds with effect from 2007. Holders of Approved Retiremnt Funds (ARFs) will be assumed to have drawn down 1pc of their fund rising to 3pc and will be liable to income tax at their marginal (42pc) rate even if they have not accessed the fund...............[/FONT]
Thanks to all. The IAPF explains the situation well but I think it very unfair that from next year I have got to drawdown 3% when I had planned to leave my modest sum of 100,000 ARf investment until my savings (from already taxed income) had run out.