Approved Retirement Funds and Approved Minimum Retirement Funds

We at Michael Hannon Financial Services are committed to finding most suitable financial products which best suits your financial needs and objectives, and none are more important than your post retirement income.


An Approved Retirement Fund (ARF) is an alternative to the 'traditional annuity'. It is a personal retirement fund where you can keep your money invested as a lump sum after retirement after taking your tax free lump sum of course!


The proceeds held within an ARF continue to invest in a range of assets selected by you at the outset and therefore the growth of your ARF fund depends on the performance of these assets. Unlike an annuity however an ARF can run out during your lifetime if:

  1. If you make large regular withdrawals from it
  2. Investment returns are less than expected

So who can access an ARF??

  1. Those who are self-employed can access an ARF by drawing their retirement benefits from a personal pension.
  2. Anyone contributing to a Personal Retirement Savings Account (PRSA).
  3. A person who is a 5% or more Director of a company and is a member of an 'occupational pension scheme'.
  4. A member of an Occupational Pension Scheme with an Additional Voluntary Contribution(AVC) and/or a PRSA AVC (in respect of their AVC funds only).
  5. The spouse of an ARF holder on death of the ARF holder.

N.B. Employees in occupational pension schemes cannot invest in an ARF/AMRF and must choose the annuity option after taking the tax free lump sum.


An Approved Minimum Retirement Fund (AMRF) is similar to an ARF, except you cannot withdraw any of your original capital until you reach 75. Until then, you can only withdraw any growth in value the fund may deliver.

If you do not already have a yearly pension income of at least €12,700 per annum (including state pension income) and do not wish to invest the 75% balance in an annuity you have the another option of investing up to €63,500 in an Approved Minimum Retirement Fund to age 75. You can then invest the remaining in an ARF or draw it down as cash after income tax.


Tax Treatment of ARFs/AMRFs

All distributions from ARFs/AMRFs are subject to PAYE. The Qualifying Fund Manager (usually the Insurance Company) deducts income tax and health levy where appropriate before the income is paid out to the individual. The health levy is not payable by those ARF holders aged 70 or over.


Tax is deducted from imputed distributions within the ARF (not AMRF). A rate of 3% will apply from 2009 and will remain at 3% each year. In other words the Revenue will tax the ARF at the marginal rate on 3% of your ARF each year whether or not you draw an income from the ARF or not.


Investment growth in ARF/AMRFs are treated under 'Gross Roll Up' legislation and therefore the investment growth is exempt from Capital Gains Tax (CGT) and Deposit Interest Retention Tax (DIRT).


On death of the ARF/AMRF holder the proceeds pass to the deceased's estate is not subject to Inheritance Tax on transfer to the deceased's surviving spouse or children 21 or over. For children under 21 normal thresholds and exemptions for inheritance tax apply.


If you are close to retirement or have already retired speak to Michael Hannon Financial Services today to review your post retirement options.