Approved Retirement Fund Specialists

Through an ARF, you can invest your pension pot in a wide range of asset classes including stocks, bonds, property, commodities, private equity and cash. 

The underlying investments you choose depend on the level of risk that you are comfortable with and your financial goals. The key to choosing the right investment is to get specialist ARF advice, to ensure to appropriate risk strategy is applied in the construction of your ARF fund portfolio.

With the help of your financial broker, you firstly need to establish your investment risk tolerance and ESG preferences.

Notably, from age 61 you must make minimum withdrawals of 4% per annum, so this must be accounted for.

Once the above parameters are established, you should choose a well-diversified portfolio of funds designed to meet your return expectations, whilst being fully cognisant of cost and volatility, and not just past performance.

There is no single investment fund manager or fund, to suit every ARF investor, age as well as investment risk tolerance, other assets, and ESG, must also be considered. 

That said, a 50-year-old ARF investor may choose higher risk funds, at least initially, than someone arranging their ARF from age 60 or older, as withdrawals must commence form age 61.

The most important thing is not to put all your eggs in one basket and not to chase high returns, without being clear about both volatility and cost impact.

The key thing is to diversify across different asset classes (asset allocation) and then to allow the fund managers to further diversify within these asset classes.

This typically means using  what are called multi-asset mutual funds, because of their low costs, A medium risk ESMA 4 portfolio, is the most typical approach (although every ARF investor must be assessed individually).

ARF charges play a huge part in the performance of your ARF, and high charges will negatively impact on its investment performance and on your ARF funds longevity.

If an ARF-holder is survived by a spouse or civil partner, then there are no tax implications on the passing of the ARF to the surviving spouse, to be then transferred into their name. However, the new owner will pay income tax on any withdrawals from the ARF.

Where a child has not attained 21 years of age; ARF monies inherited will be subject to inheritance tax at 33%, should their overall inheritaces exceed their CAT tax-free threshold.

Where a child has attained 21 years of age; ARF monies inherited will be subject to a once-off income tax deduction at 30% and this will not affect their CAT tax-free threshold in respect of othe inheritances.

An ARF paid to anybody else (other than a Surviving Spouse or Children) then Income Tax at source and CAT apply.

There are many reasons you may be unhappy with your existing ARF. These can be:

• Excessive Fees
• Poor or erratic Investment Performance
• Poor or no Communication from the ARF Provider / Insurance Company
• Poor or no Communication from your Financial Advisor
• Lack of expertise from your Financial Advisor

If this is the case, you can transfer the agency form your existing financial advisor to a newly appointed one. Then, your new advisor can alter the underlying portfolio as appropriate, as well as outline a service level agreement, to probably meet your expectations. 

Whereas all investing carries a level of risk, ARFs also offer much more flexibility than the alternative annuity option, as well as full tax-free inheritance between spouses. The key is to keep charges low and to diversify to manage risk and of course to review your ARF portfolio on a regular basis.

It’s important to understand that annuity rates are dependent on long-dated bond rates, which are influenced by interest rates, so annuity rates need to be high at the time of purchasing an annuity, to offer any real value.

Remember also,  if you go the ARF route, you can still return to the annuity route down the road, but once you’ve purchase your annuity that’s it.

This refers to the way in which your income is paid to you from your ARF.

• From the year you turn 61, tax is payable on a minimum withdrawal amount each year of 4% of the value of the fund at that date. This withdrawal is liable to income tax, Universal Social Charge and PRSI (if you are liable for this). From the year you turn 71 the minimum withdrawal is increased to 5%.
• Where a greater withdrawal is made during the year, tax will be paid on the greater withdrawal amount. The minimum withdrawal rate is set in line with the required imputed distribution amount which may be altered to reflect changes in legislation. You can choose to take a higher withdrawal amount if you wish. 

Unless you request a set income amount, the minimum 4%, 5% or 6% imputed distribution figure will be calculated based on your ARFs value at the date of payment.

So, for example if you nominate a 4% distribution, payable on a monthly basis, your payment may fluctuate in line with the changing assets values of those held in your ARF.

Where the 30th November date comes into effect, is to ensure that relevant imputed distribution figure e.g. 4% is meet based on the ARFs value on the previous 30th November. If there’s a shortfall come the end of the calendar year the QFM will need to increase the final years payment to reach this Revenue requirement.

Yes, whilst a robust investment portfolio will be put together to work of you on an personal basis, your ARF remains fully flexible in terms of switching funds, or making additional withdrawals if and when required. 

You could also decide to transfer your ARF to an Annuity if underlying interest and therefore annuity proved more attractiv in the future.

An ARF is designed to automatically provide your with a regular income from age 61 onwards, but you are entitled to make additional withdrawals as and when you require.

However, long term management of your ARF, considering not only the possibility of bleeding your ARF dry much too early, but also managing the tax payable on your withdrawals is imperative, and this should be discussed with an impartial financial advisor at set-up.

A properly appointed financial advisor, will automatically review your ARF annually to check both its investment performance and the impact of withdrawals to ensure that its kept-on track to match your requirements.

It is also important to understand that you can never take a tax-free lump sum from an ARF at any point, and that all withdrawals will be subject to your marginal rate of income tax.

At the point of setting up an ARF however, if you are existing an Occupational Pension Scheme, Executive Pension Plan, PRSA or Personal Retirement Bond on leaving that employment you can, from age 50, take a 25% tax-free lump form those plans proceeds prior to investing the balance in an ARF.