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When the majority of people reach retirement, they have already built up a pot of money to use for the coming years. They are then faced with the decision of what they are going to do with it. Most people tend to take a chunk of the overall fund (generally ¼ of the pot). Generally, this chunk of money is tax-free and can be used for whatever purpose they want. At this point, people usually put the balance of their pot into an Approved Retirement Fund (ARF for short).


What Is an Approved Retirement Fund?

An Approved Retirement Fund is basically a personal retirement fund. You can keep your money invested in this fund after retirement. You can then withdraw from it regularly to essentially give yourself an income. It should be noted this will be subject to income tax, PRSI (up to age 66) and USC.

After 30-40 years of accumulating money for your retirement, you can finally get your hands on some of that money. Not only that but investing this money allows additional income, for example, some of our clients use their ARFs to buy a property, have a regular income, invest in funds and so on.

Here’s where the tax man comes in. Remember all that generous pension tax relief in the past? The tax man now wants to tax your income in retirement. But it’s not all bad news — the tax regime in retirement is exactly the same pre and post-retirement. Most people, if they have a modest level of income end up paying very little tax on their withdrawals from their ARF. The real difference with the ARF is that it grows tax-free.

As financial advisors, we will make sure you get a return from your ARF as close to your yearly aim so that you can live off the investment rather than the capital. This then will help to extend the longevity of your ARF.

You have to remember an ARF at the end of the day is a large pot of money. If you are dipping in and the rate of extraction is greater than the rate of the increase in the investment, well then eventually you will diminish the pot. The last thing anyone wants is to be in their late 70s or early 80s with an empty pot.  One thing many of our retirement clients are concerned about is nursing home fees. That is why longevity is so important.

Spending in retirement shouldn’t be a flat line of constant withdrawal. Spending in retirement is U-shaped. This means we spend more in our 60s-70s while we are fit and able to do things like travel. Then the rate of expenditure decreases as we hit the mid to late 70s. From here it will either tail off in the same direction or rocket up with health care expenses increasing.

Our focus is to give you the capacity to be able to have a “fun time” aka the first 10 years or so of retirement. While aiming to provide the certainty that when you are withdrawing money from your fund you are not impacting its longevity. There is no point in saving for 30 or 40 years to have a miserable retirement. The point of it all is to enjoy your money.

Another thing to note about ARFs is that if something was to happen to you, the remainder of the ARF will be left to your estate. This is also a positive perk that you should keep in mind when assessing your retirement options.

The main benefit of an ARF is the flexibility it brings. It allows you enormous flexibility over how you draw your money down.


Who Can Take Out an ARF?

An ARF is available to the members of an Occupational Scheme (assuming scheme rules allow) and also to individuals that hold a Personal Pension, Personal Retirement Savings Account (PRSA) or Retirement Bond and have reached Normal Retirement Age or have taken Early Retirement.

The Main Benefits of an ARF Scheme

Before we finish up let’s run back through the main benefits of an ARF scheme

  • You decide when and at what rate you draw on your ARF in retirement (subject to a minimum 5% per year withdrawal from the age of 61).
  • Upon death, any remaining money in your ARF will be passed either to your surviving spouse or to your estate.
  • Investment options: You have a wide array of investment options available to you to suit your appetite for risk and return. Not only that but you can change these at any time to suit your attitude towards risk and different market movements.
  • By investing in an ARF, your money can remain invested in funds that offer growth potential. This means your fund can continue to grow while in retirement
  • Any investment growth achieved on your ARF is tax-free; however, remember that withdrawals from your ARF are still taxable.
  • You are in full control of your fund and therefore can take as much or as little from the fund as your financial situation requires
  • Another thing to note is if you decide that you need a more secure, regular income your ARF can be used to buy an annuity at a later date.

At Rockwell, we take all the complexity out of planning for retirement and help you make the right decisions along the way. Why not let us do all the legwork to make sure your hard-earned pension savings are being optimised? Arrange a consultation today with one of our pension experts by emailing us at or calling us on +353 1 296 6120.

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