ARF

Benefits of investing in an Approved Retirement Fund

With Bank of Ireland Life’s ARF you can manage and control your retirement fund to suit your own needs.

• Tax-free Growth: Your ARF invests in funds that currently benefit from tax-free growth.
• Inheritance Planning: You can pass on the value of your ARF to your dependants on death.
• Investment Options: A wide range of investment funds offering you differing levels of potential growth versus security.
• Access to your Fund: You own your ARF and the money invested in it. This means that you can take out cash lump sums from your fund whenever you need to, subject to the payment of any tax due.
• Regular Income: You can set up your ARF in such a way so that it pays you a regular income. However it is important to remember that, unlike a Pension (a secure income for life), the regular income provided by your ARF is not guaranteed for life, as it depends on the funds available, any growth achieved and the sum of your withdrawals relative to your total fund.
• Communication: Each year we will send you an Annual Benefit Statement outlining current value of your fund.

ARF Income Options

You can make withdrawals at any time from your ARF. However, the frequency and size of your withdrawals will impact the length of time your ARF can provide you with an income in retirement. Withdrawals are subject to Income Tax, USC (and PRSI up to age 66 only).

For tax purposes an actual or imputed withdrawal must be made each year from an ARF.  This figure is 5% of the value of an ARF as at 31st of December each year.  Any actual withdrawals made during the year will be taken into account when calculating the 5% figure.

The deemed annual distribution of 5% of the value of the fund as at 31 December each year has been increased to 6% for an individual whose aggregate value of assets in an ARF (or combination of ARFs) exceeds €2m.This increase will take effect for deemed distributions based on asset values as at 31 December 2012. We await clarification (in the Finance Bill) as to whether the value of an individual’s AMRF (currently a maximum of €119,800) will be taken into account when calculating the €2m ARF limit.

This required withdrawal only starts to apply once you are aged 60 for the entire tax year and it only applies to ARFs. It does not apply to AMRFs.

Actual withdrawals made by you during the year from your ARF will count towards the annual 5% withdrawal requirement.

What are the risks of an ARF?

By purchasing a Pension you have the comfort of a guaranteed income for the remainder of your life - whereas with an ARF there is no guaranteed income, and the length of time that your fund will be available depends on the withdrawals you make and the investment growth achieved by your fund. For example, if a high level of withdrawals were made relative to the growth achieved, there is a risk that your fund could run out before death – and the longer you live, the greater the chances of this happening. It should also be recognised that in order to achieve good returns it is likely that an ARF will invest at least partly in assets such as equities and properties, and that the value of these assets may fall as well as rise, particularly in the short term.

What is an Approved Minimum Retirement Fund?

Similar to an ARF an AMRF is an investment fund which is personally owned by you. It has the following features:

• You cannot make a withdrawal from the original capital invested. Any investment growth achieved can be accessed at any time and this is subject to taxation.
• An AMRF automatically becomes an ARF:
• on the individual reaching age 75
• on death before the age of 75.
• on the individual satisfying the guaranteed income requirement.
• For an AMRF set up after 6 February 2011 you are required to have an guaranteed income for life of €18,000 per annum
• For an AMRF set up before 6 February 2011 this figure is €12,700 per annum for a 3 year period.  After 6 February 2014 the amount will be 1.5 times the State Pension (currently €18,000 p.a.).
• Once an AMRF becomes an ARF then withdrawals are permitted at any time.

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 January 2012, however Bank of Ireland Life may amend the fees and charges and further information in this regard is contained in your policy conditions.

Important Note:
It is important to note that the value of the ARF/AMRF investment fund will depend on a number of factors such as contributions made and investment returns etc.,  which are not guaranteed. Past performance is not necessarily a reliable guide to future investment returns, which may be higher or lower than assumed. The value of your investment and the sum you originally invested are not guaranteed.
Terms and conditions apply. Your ARF/AMRF is governed by a policy document and if there is any conflict between the information on this website and the policy conditions the policy conditions will prevail.
The information about Bank of Ireland Life's products and services is intended only for Irish residents. Bank of Ireland Life's products may only be bought by Irish residents.
Bank of Ireland Life is a trading name of New Ireland Assurance Company plc.
New Ireland Assurance Company plc trading as Bank of Ireland Life is regulated by the Central Bank of Ireland.   Bank of Ireland Insurance and Investments Limited is regulated by the Central Bank of Ireland.  Bank of Ireland is regulated by the Central Bank of Ireland.  Bank of Ireland and Bank of Ireland Insurance and Investments Limited are tied agents of Bank of Ireland Life.  Members of Bank of Ireland Group.

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.