Retirement Fund Ireland - Investing in your Future

Retirement Fund Ireland – Investing in ARF for your Future

When it comes to Retirement Fund Ireland, one of the best options for investors is an ARF or Approved Retirement Fund. This type of fund has been specifically designed for those looking to invest in their future and secure a comfortable retirement. If you’re interested in learning more about Retirement Funds Ireland and ARFs, we will discuss what these funds are, how they work, and why they might be a good option for you.

What is an Approved Retirement Fund?

ARF is an Approved Retirement Fund that is regulated by the Irish government. These funds under Retirement Funds Ireland were designed for those looking to invest in their future and secure a comfortable retirement. 

The Approved Retirement Fund (ARF) is an individual retirement fund in which it is possible to keep the pension funds in a lump sum following retirement. You can frequently take money out of it to provide yourself with an income. Any funds left in your account after your death may be given to your next relatives.

The Finance Act 1999 introduced choice in retirement, allowing Retirees to invest in a range of retirement fund investments via an approved (Minimum) Retirement Fund (A(M)RF). Before 1999, options during retirement were limited to purchasing a pension, which was payable for the rest of their lives (an annuity).

How Does an ARF work?

An ARF is a Retirement Fund in Ireland that gives the Retiree more control over how and when they access their pension. The individual can choose to make withdrawals as and when they please, making it a more flexible option. ARF is a self-invested pension specialized by Newcourt Retirement Fund Managers Limited (NRFM) together with its associated business Newcourt Pensioneer Trustees Limited.

After retirement, following the lump sum tax-free, you can invest the remainder of your pension funds (75%) in an ARF one, which is set up and managed by NRFM. You then become an ARF Holder and have full ownership of the retirement investment fund, from which can draw a regular income.

The income you earn will be subject to tax at the marginal rate plus the universal social cost (and PRSI for those under the age of 66). NRFM is required to deduct tax on income under PAYE rules, which means that the tax deduction is made from the point of origin. You may use your taxes credits or allowances as this source of income if you want.

As of the Finance Act 2006, it is now mandatory for ARF holders to take a portion of their accounts annually as pension income. This is known as an “Imputed Distribution” (i.e. make a draw-down mandatory of the ARF value by the 30th of November every year, pay the income tax and allow you to receive an amount of net revenue).

Who Can Invest in an Arf Account and What Is the Process?

For you to set up an ARF and start your Retirement Fund in Ireland, you must have a pension income of 12,700 per year or have put up a minimum of 63,500 into the form of an Approved Minimum Retirement Fund (AMRF) and/or an annuity. The minimum requirements for an ARF are currently the revenue limit and could change in the near future.

People who are under the following categories can invest in a Self-Invested A(M)RF:

  • Existing A(M)RF holders – both Self Administered A(M)RFs and traditional A(M)RFs 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 SponsoredDefined contribution pension schemes, including Small SelfAdministered
  • Pension Schemes are subject to certain conditions.
  • The minimum age of entry to an ARF/AMRF is 50 for members of occupational pension schemes and 60 for all 
  • other pension contracts

What Are the Benefits of Investing in ARF?

Investing in ARF which is a retirement fund in Ireland offers you numerous benefits. 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.

Aside from this, the Self-Invested A(M)RF gives you the chance to manage your funds without an insurance company.

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

NMRF holds the A(M)RF assets in trust for investors of the A(M)RF investor. This means that, unlike insured A(M)RFs, we don’t hold the assets on the balance sheets of our clients. Each account is named under the client, and the customer is co-signatory of his or her retirement fund investment(s) and bank accounts.

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

If you’ve invested for a long period of years, you might have a good understanding that risk states that your retirement fund investments may decrease in value. 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.

There are various levels of income offered by the different asset classes. Those that earn more in income might also carry a greater chance of sustaining capital losses. Before you select an income strategy, you have to be confident about the level of risk.

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. 

Remember that although compounding, in general, could have a major lasting impact, there will be times when your retirement fund investment isn’t growing. Although, there is no guarantee that compounded investment gains could prove to be much more than your individual contributions.

When you start saving early, such as in a retirement fund in Ireland, you will profit from the benefits of compounding. It allows your savings to generate additional income. In the span of years, compounding could significantly alter the way you save.

An ARF is a Retirement Fund in Ireland that allows you to save for retirement while still giving you access to your money should you need it. It is a long-term retirement fund investment and has the potential to grow over time. Talk to our financial advisors at NMRF to learn more about how an ARF could help you secure your future.