Retirement Fund Ireland - Investing in your Future

Investing in ARF for your Future

Approved Retirement Fund (ARF)

An Approved Retirement Fund (ARF) is a post-retirement contract. On retirement from a pension contract and after taking your retirement lump sum, the balance of your pension fund can be invested in an ARF.

You decide where you want to invest and you can withdraw a regular income or once-off cash lump sums from your ARF whenever you want. Any income you make from the ARF will be liable to income tax at your marginal rate plus the universal social charge, and PRSI if you are under age 66. Alternatively, you can choose to use the fund in your ARF to purchase an annuity (an income for life) at a later date.

How Does an ARF work?

Once you are aged 60 years or over for a full tax year it is a Revenue requirement that you make a deemed withdrawal of a certain amount each year from your ARF and pay tax as if you had made an actual withdrawal. Where the total ARF value is €2 million or less, the deemed withdrawal is 4% per annum if you are aged between 60 and 70 years, or 5% per annum if you are aged 70 years or over for the full tax year. The deemed withdrawal is 6% per annum if the total ARF value exceeds €2 million. Any actual withdrawals made by you during the year from your ARF will count towards the deemed withdrawal limit.

Who can invest in an ARF?

People who are under the following categories can invest in a Self-Invested ARF:

  • Existing ARF holders – both Self Administered ARFs and traditional ARFs with Insurance Companies
  • Personal Retirement Savings Account (PRSA) contract holders
  • Personal Pension and Self Invested Personal Pension contract holders
  • Additional Voluntary Contribution (AVC) contract holders
  • Members of Employer Sponsored Defined contribution pension schemes, including Small SelfAdministered
  • Pension Schemes are subject to certain conditions.
  • The minimum age of entry to an ARF is 50 for members of occupational pension schemes and 60 for all 
  • other pension contracts

What Are the Benefits of Investing in ARF?

An ARF gives you greater flexibility in how retirement savings are managed. An ARF lets you keep investing in the market while having the capability to control your retirement fund investment and receive an income that is flexible in retirement.

Your money can be distributed over a variety of investment options that are allowed:

  • Deposit Accounts
  • Direct Property investment (residential or commercial)
  • Choice of International Investment Managers
  • Stockbroking firms
  • Our clients use multiple platforms
  • Full suite of Insurers investments funds
  • Private equity

What Are the Risks of ARF Accounts and How Can They Be Minimized?

The general rule is that higher-risk investments can yield a higher return, whereas low-risk investments typically yield a lower return.

The chance that the capital in your ARF is not able to be used is influenced by three primary aspects:

  • Life Expectancy

Life expectancies rising are certainly an excellent thing and creating a huge strain on the state and pension pots. If you’re thinking about your retirement savings, it’s crucial to be aware of the chance of living beyond the amount you put aside to retire.

  • Inflation

As you age, the inflation rate increases and becomes more of a concern when your income isn’t increasing. This is why you might decide to invest a portion of your retirement funds in order to grow your capital and, consequently your earnings.

  • Income

We all wish to have enough money for a stress-free retirement, however, this is becoming more difficult to attain. That’s why you might want to invest some of your retirement savings in order to generate an income and thus safeguard the amount of your savings.

What Is the Importance of Long-term Investing for Retirement Planning?

One of the benefits associated with investing for the long term is the possibility of compounding. When your retirement fund investments generate earnings, these earnings are invested and could earn more. The longer your money is invested, the better the chance of growth and compounding. 

We at Newcourt Retirement Fund Managers Limited (NRFM) believe that retirement shouldn’t be a nightmare or complicated. You’ve put in the effort to save and earn your money for years now is the chance to relax and enjoy it.

When deciding which retirement pension plan is right for you, it is important to seek professional financial advice from a Qualified Financial Advisor to ensure that you are making the best decision for your individual needs.