'access' to ARF

recipio

People, a short query for the pension experts.
I see the requirement for access to your ARF is now an income of 12,700 for life - formerly 18k.
Has anybody done this ? Firstly its hard to prove an 'income for life' - that excludes almost everything except another pension or investment sum ?
Secondly, if you were in that happy position do you get total access to the funds or are there mandatory rules about re-investing it. ? I'm struggling to get straight answers about this.

cheers.

Liam D Ferguson

For this purpose "income" means income that is guaranteed to be paid to you for the rest of your life. So in practice it usually means other pensions and the State pension.

If you have the €12,700 per year income and you have funds that can go into an ARF, you can either (a) re-invest these funds into an ARF and draw them down as and when you please or (b) draw them all down now in one lump sum. But remember that withdrawals will be taxable. So if you happen to have €50,000 and you draw it all down as one lump sum, this will be taxed as income of €50,000. Unless the amount is small, you're usually better off drawing it down over a period of years to avoid paying a lot of tax on it.

recipio

Thanks.
that makes sense. Assuming a person has 12,700 for life, can you draw an income from the yearly interest ( it is a pension after all ) of do you have to eat into the capital.? Are you taxed on interest drawdowns. ?

Liam D Ferguson

You have to draw an income of at least 5% of the value of the ARF per year, or else face double taxation. So most people withdraw at least 5% per year as an income.

Whether or not you dip into the capital depends on what you choose to invest your ARF in. If your chosen investments are returning an income of more than your withdrawals, then your capital will remain untouched. Otherwise your capital will be eroded over time.

Any withdrawals from an ARF are taxable as income.

coylemj

Liam D Ferguson wrote: »

You have to draw an income of at least 5% of the value of the ARF per year, or else face double taxation. So most people withdraw at least 5% per year as an income.

+1 You are taxed based on an 'imputed' distribution (withdrawal) whether you withdraw the money or not so as you say, it makes perfect sense to take the money out as you're being taxed as if you did.

Worth noting though that an imputed distribution only applies if the ARF holder is aged 60 or over for the entire tax year so if you retire early and put some of your AVC or PRSA into an ARF, an imputed distribution will only apply beginning in the year you reach the age of 61 - unless your birthday is Jan 1st!

recipio

Thanks guys, appreciated.

recipio

People,just jumping on this old thread I posted a few years ago. I have an ARF in position and a small pension. I'll get the state contributory pension in 2018 and that will bring my income well over 12,700 annually. I'd like to access the ARF then but will it be tax free.? It is under 200K,

homer911

Pretty sure the Tax free bit is limited to 25% as I have heard the figure of 800k mentioned a few times to maximise your benefit. Not an expert!

recipio

homer911 wrote: »

Pretty sure the Tax free bit is limited to 25% as I have heard the figure of 800k mentioned a few times to maximise your benefit. Not an expert!

Thanks, as I read it you only pay tax on sums over 200k but its kinda hard to get a clear answer. Tax is the 'penence ' the State makes you pay for getting tax relief on your pension contributions. If I were doing it all over again I would just save the money.

Henry Ford III

homer911 wrote: »

Pretty sure the Tax free bit is limited to 25% as I have heard the figure of 800k mentioned a few times to maximise your benefit. Not an expert!

Not necessarily.

The tax free lump sum (from age 50 onwards potentially) can be higher, depending on salary and service.

ANXIOUS

Henry Ford III wrote: »

Not necessarily.

The tax free lump sum (from age 50 onwards potentially) can be higher, depending on salary and service.

That's not correct, the maximum lump sum that can be received Tax free is €200k. The maximum lum can in theory be any amount, however all amounts of €200k are taxed at various rates.

Op you seem to be very keen to draw down this ARF, is not a very tax efficient way to access income. Also in generally you probably already received lump sum from this, can you confirm?

recipio

ANXIOUS wrote: »

That's not correct, the maximum lump sum that can be received Tax free is €200k. The maximum lum can in theory be any amount, however all amounts of €200k are taxed at various rates.

Op you seem to be very keen to draw down this ARF, is not a very tax efficient way to access income. Also in generally you probably already received lump sum from this, can you confirm?

Yes, I took a lump sum on setting up the funds. I would prefer to access the funds rather than invest them for an income once I get the contributory pension. You are saying that I can access them tax free up to 200k ? How do you feel it is not tax efficient ?

ANXIOUS

recipio wrote: »

Yes, I took a lump sum on setting up the funds. I would prefer to access the funds rather than invest them for an income once I get the contributory pension. You are saying that I can access them tax free up to 200k ? How do you feel it is not tax efficient ?

No, you can't access any of it tax free above your tax credits.

Well any gains that you make are all tax free, you can pretty much invest them in anything including property.

So for a very basic and high level example.

You could buy an apartment and then get the rent paid into your Arf tax free and then sell it on and any capital gain would also be tax free.

Or you could withdraw the money from the ARF and pay tax and it then rent it out and pay tax on the rent. Sell it and make a capital gain on that and then pay tax on that.

recipio

ANXIOUS wrote: »

No, you can't access any of it tax free above your tax credits.

Well any gains that you make are all tax free, you can pretty much invest them in anything including property.

So for a very basic and high level example.

You could buy an apartment and then get the rent paid into your Arf tax free and then sell it on and any capital gain would also be tax free.

Or you could withdraw the money from the ARF and pay tax and it then rent it out and pay tax on the rent. Sell it and make a capital gain on that and then pay tax on that.

Not good news at all. I keep reading about getting access if you can prove an income for life over 12,700 p/a. ? I will contact my pension providers but I always feel they don't want people to cash out as it naturally diminishes their income.

ANXIOUS

recipio wrote: »

Not good news at all. I keep reading about getting access if you can prove an income for life over 12,700 p/a. ? I will contact my pension providers but I always feel they don't want people to cash out as it naturally diminishes their income.

You really need to get advice.

If you meet the guaranteed income condition all that changes is your AMRF becomes an ARF of which you can access all of this subject to tax.

Henry Ford III

ANXIOUS wrote: »

That's not correct, the maximum lump sum that can be received Tax free is €200k. The maximum lum can in theory be any amount, however all amounts of €200k are taxed at various rates.

You are quite correct. I confused ARF and PRB.

Must be tired.

The J Stands for Jay

recipio wrote: »

Not good news at all. I keep reading about getting access if you can prove an income for life over 12,700 p/a. ? I will contact my pension providers but I always feel they don't want people to cash out as it naturally diminishes their income.

Do you have an AMRF or an ARF?

If it's an AMRF you can withdraw 4% each year. If it's an ARF y you can just take the lot.

Any money you get from either will be taxed as PAYE income. The €12700 income can only be from State pensions and annuities (private pensions). Once you can show payrolls or confirmation letters, your AMRF converts to an ARF and you can do what you want With it.

recipio

Thanks all for the excellent advice. I will contact my pension advisors. Appreciated.

Liam D Ferguson

recipio wrote: »

People,just jumping on this old thread I posted a few years ago. I have an ARF in position and a small pension. I'll get the state contributory pension in 2018 and that will bring my income well over 12,700 annually. I'd like to access the ARF then but will it be tax free.? It is under 200K,

If you already have an ARF in place then you must have already "retired" from whatever pension scheme these monies came from, taken your lump sum and put the rest into your ARF. So you will have already received your tax-free lump sum from the pension scheme and any references to €200,000 or any other figure are irrelevant in this context.

From your query, I suspect what you have is actually an Approved Minimum Retirement Fund or AMRF. Very similar to an ARF but with limited access.

If, in 2018, the combination of your State Pension and whatever other pensions you already receive bring you over the €12,700 per year threshold (or whatever threshold is in force in 2018), then you can access the monies in your AMRF whatever way you want - as a single withdrawal, multiple withdrawals or an ongoing income.

Any such withdrawals will be taxable as income. So if, for example, in 2018 your State Pension is €12,000, your other pensions are €8,000 per year and you withdraw €10,000 from your AMRF, then your total income in 2018 will be €30,000 and you will pay tax overall on an income of €30,000.

Please note that to "unlock" an AMRF in this way, any pensions you are counting on top of the State Pension to qualify for the €12,700 threshold must be guaranteed to be payable for your life.

Hope this helps.

recipio

Liam D Ferguson wrote: »

If you already have an ARF in place then you must have already "retired" from whatever pension scheme these monies came from, taken your lump sum and put the rest into your ARF. So you will have already received your tax-free lump sum from the pension scheme and any references to €200,000 or any other figure are irrelevant in this context.

From your query, I suspect what you have is actually an Approved Minimum Retirement Fund or AMRF. Very similar to an ARF but with limited access.

If, in 2018, the combination of your State Pension and whatever other pensions you already receive bring you over the €12,700 per year threshold (or whatever threshold is in force in 2018), then you can access the monies in your AMRF whatever way you want - as a single withdrawal, multiple withdrawals or an ongoing income.

Any such withdrawals will be taxable as income. So if, for example, in 2018 your State Pension is €12,000, your other pensions are €8,000 per year and you withdraw €10,000 from your AMRF, then your total income in 2018 will be €30,000 and you will pay tax overall on an income of €30,000.

Please note that to "unlock" an AMRF in this way, any pensions you are counting on top of the State Pension to qualify for the €12,700 threshold must be guaranteed to be payable for your life.

Hope this helps.

Thanks Liam,
yes, I had to set up both an ARF and AMRF when I retired.It is disappointing that I cannot access these funds without being liable for tax. I have put in a query to my pension providers.

Liam D Ferguson

recipio wrote: »

Thanks Liam,
yes, I had to set up both an ARF and AMRF when I retired.It is disappointing that I cannot access these funds without being liable for tax. I have put in a query to my pension providers.

If you already have an AMRF then you can access your ARF now, without waiting for the State Pension in 2018.

You can also access 4% per year from your AMRF.

Any withdrawals from either an ARF or an AMRF are considered to be pension payments. All pensions in payment - State pensions, occupational pensions, annuities, ARF payments, AMRF payments - are taxable. Whether or not you actually have to pay tax on them depends on your overall personal circumstances - your total taxable income from all sources, your tax credits etc.

coylemj

recipio wrote: »

yes, I had to set up both an ARF and AMRF when I retired.

You didn't have to set up those funds when you retired, you did so to avoid paying tax on the lump sum. It's what people do at the time of their retirement when they have exhausted all of their entitlements to tax-free lump sums and there's money left over such as from an AVC.

recipio wrote: »

It is disappointing that I cannot access these funds without being liable for tax.

Stashing it away into an ARF or AMRF is simply a way of deferring the tax but it has to be paid as you withdraw it unless your total income at the time is below the relevant thresholds for PAYE and/or USC.

Henry Ford III

coylemj wrote: »

You didn't have to set up those funds when you retired, you did so to avoid paying tax on the lump sum. It's what people do at the time of their retirement when they have exhausted all of their entitlements to tax-free lump sums and there's money left over such as from an AVC.



Stashing it away into an ARF or AMRF is simply a way of deferring the tax but it has to be paid as you withdraw it unless your total income at the time is below the relevant thresholds for PAYE and/or USC.

An AMRF is mandatory if the €12700 guaranteed income isn't in place when retirement benefits are being taken.

An ARF would be used for any excess over the €63500 AMRF limit.

Imputed distribution of 4/5/6% depending on circumstances still applies. So it's no more a tax deferral than an annuity, which is the only alternative.

recipio

Thank you all for the advice. I see references to getting access to the funds at age 75 - tax free that is. Can this be done or are the funds locked away for life.?

The J Stands for Jay

recipio wrote: »

Thank you all for the advice. I see references to getting access to the funds at age 75 - tax free that is. Can this be done or are the funds locked away for life.?

There is no tax-free access at 75. You only gain the ability to withdraw all of your AMRF at 75.

recipio

Thank you all for the excellent advice. My pension provider confirms the position. I am a bit annoyed with myself for blindly paying into a pension fund during my working life and not checking the fine print.
Of course I can't expect pension funds to be a form of tax free saving but I didn't expect them to be locked away permanently unless you are willing to take a big tax hit. Older and wiser indeed...........:rolleyes: