ARFs and AMRFs – understanding your retirement options

ARFs and AMRFs are personal retirement funds which allow you to keep your money invested after retirement as a lump sum.

An approved fund is a viable alternative to purchasing an Annuity, which with the current low interest rate is offering poor returns, and gives the investment holder greater control of their inheritance and estate.

In the current low interest rate environment people are questioning the poor returns offered by annuities – along with the loss of capital, investment control and estate planning. Click here to read more about annuities (LINK), but for now, let’s take a look at what exactly are an Approved Retirement Fund (ARF) and Approved Minimum Retirement Fund (AMRF).

What is an Approved Retirement Fund (ARF) and an Approved Minimum Retirement Fund (AMRF)?

ARFs and AMRFs allow individuals to transfer their accumulated pension fund to a post-retirement structure and invest in a gross roll-up strategy, which means no tax on gains or income is charged.

An AMRF is required for ARF holders do not have a guaranteed income of €12,700 per annum. In this case, they must set up.

ARF holders not in receipt of a guaranteed income of €12,700 per annum must first set up a separate fund with a starting balance of €63,500 – this is an AMRF. Withdrawals on the original capital of an AMRF cannot be made until the ARF holder reaches age 75, or if the minimum guaranteed income threshold is reached, where the fund is automatically transferred to an ARF.

How is an ARF used?

The investment strategy of an ARF can range from the low (cash, capital gauranteed products) to the high risk (equities, commodities, direct property, private equity). Individuals can withdraw income from their ARF as and when they need and income is taxed as it is withdrawn. On death the fund is passed on to the spouse or children, making it a useful strategy for estate planning.

Is an ARF/AMRF right for you?

An ARF or AMRF makes good sense if you are retired and have taken a tax-free lump sum (up to 25%) of the pension fund value and want to make a smart investment with the remaining balance. It suits those who want to be able to make regular withdrawals of the current fund value each year, and want to be able to pass on the money in the fund to loved ones.

You’ll need to be comfortable with the fact that there are charges on these kinds of plans and the fund value may rise or fall depending on the market.

Because ARFs and AMRFs are investment products, not pension schemes, they should be handled with care. Most ARFs are offered by life companies but this limits the investment flexibility to the investment options the life company offers. We recommend seeking professional independent investment advice before you make a decision.