ARF

Benefits of an Approved Retirement Fund (ARF)

• Invest in funds that benefit from tax-free growth*
• Inheritance planning: pass your Bank of Ireland Life ARF on to your dependants in the event of your death
• Wide range of investment options
• Take out cash lump sums when you need to (these are liable to income tax)
• Regular monthly income if you want (subject to tax)
• Communication: annual benefit statement with current policy information

Remember that unlike a pension - a specified regular income for life - the regular income provided by your ARF is not guaranteed for life, as it depends on the funds available, growth received, and the sum of withdrawals relative to your total fund

• Partial encashment charge - each withdrawal from your ARF is subject to a charge (currently €35)
• Regular income charge - if you choose to receive a regular income from your ARF, there is an administration charge (currently €4 for each payment)
• Management charge - each month units are deducted from your fund to meet the cost of a management charge. The charge depends on the fund or funds chosen, and your advisor can tell you the charge that would apply in your case.

The above fees/charges apply at Sept 2007, however Bank of Ireland Life may amend the fees and charges and further information in this regard is contained in your policy conditions.

All pension plans give you the option to purchase a pension on retirement - a specified income for life, but some pension plans may allow you to invest your fund in an Approved Retirement Fund (ARF) and take a taxable lump sum.

What you can do with the proceeds of your pension plan depends on your employment status and the type of pension plan you own.

The option to avail of an ARF is only available to self-employed proprietary directors (as defined in legislation)*, PRSA contributors and in relation to AVCs made to an occupational pension scheme.

In order to invest in an ARF you must have a guaranteed pension income for life of at least €12,700 per annum or more in payment at the time the ARF begins, from other sources. This can include your State pension benefits (single person rates only), a pension from an occupational scheme, or a pension bought with the proceeds of another pension plan.

The Revenue have introduced an imputed annual distribution from an individual's ARF beginning from 2007. From 2007 for tax purposes an actual or imputed withdrawal must be made each year from ARFs (but not AMRFs).

* A proprietary director is one who controls more than 5% of the voting rights in a company or in a company's parent company. Shares that are held by the director's spouse or minor children are taken into account. Shares held by trustees of a settlement to which the director or the director's spouse had transferred shares are also included.

Approved Minimum Retirement Fund

If you do not have a guaranteed income for life of at least €12,700 a year, then before taking out an ARF (assuming that you qualify) you must use €63,500 of your retirement fund to invest in either an Approved Minimum Retirement Fund (AMRF) or purchase a pension. If your retirement fund is less than €63,500 then the whole amount must be used in this way.

An Approved Minimum Retirement Fund, or AMRF, operates in the same way as an ARF except that there are restrictions on the amount of withdrawals that you may take from the fund before age 75.

Until that time you cannot withdraw any of the original capital but you can withdraw any investment growth achieved. Any withdrawals will be subject to taxation.

When you reach 75 (or on earlier death), the AMRF becomes an ARF and there are no further restrictions on withdrawals, however they will be subject to taxation.