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ARFs are often used by those who have money in an AVC at retirement. Firstly, it makes sense to take the maximum amount of tax-free cash possible from the AVC. This is different for everyone based on years’ service and salary and is subject to a maximum of €200k.

An ARF gives you more control over how your retirement fund is managed. An ARF allows you to remain invested in the market with the ability to control your investment and take a flexible income in retirement

If there is a taxable balance, however, you must typically choose between one of the following options:

Taxable Cash – Take all the money at the point of retirement paying tax, PRSI and USC. Depending on your income and tax situation you could be giving most of your fund back to the tax man! One advantage if it is an advantage is it gives you immediate access to the fund.

Buy an Annuity – This is basically selling your pension pot to the highest bidder who in turn will offer you a guaranteed pension for life. Annuities are based on interest rates and life expectancy stats; they are not a popular option.

Invest in an Approved Retirement Fund (ARF) – This is a post-retirement product to which you can move monies from your AVC, essentially keeping them in an investment fund. An ARF works by allowing you to invest all or part of your pension fund after you retire. You can decide on the type of fund you would like to invest in, and the amount of risk you’re comfortable with. With an ARF you can still withdraw from your fund on a regular or ad hoc basis (subject to income tax and USC. PRSI may also apply). But it’s worth remembering that since your pension fund is still invested, its value may go down as well as up. Long story short, an ARF is the same as an AVC except you’re now taking money out instead of putting it in.

There are advantages and disadvantages to each of these options and must be considered in the context of your overall financial situation. That said, the ARF is the most popular option in recent years.

Look at our Consultancy options to explore what options best suit you

Note: Your ARF does not need to be set up with your existing provider. Remember it’s your money your choice

Note: Investments can fall as well as rise. Past performance is no guarantee of future results.