The Finance Act 2021 was signed into law at the end of last year. There are a number of important changes for consumers brought about by this. We’ve received several questions specifically in relation to retirement options from our clients and have summarised the new position below.
For many years, at retirement you may have had the option to transfer some or all of your retirement fund to an Approved Minimum Retirement Fund (AMRF) or an Approved Retirement Fund (ARF). These are post-retirement investment plans. They allowed you to continue to invest your pension fund in retirement and draw down money as you need it, rather than buying an annuity.
The is one main difference between the two options. This is if you were under 75, you could not transfer to an ARF unless you could demonstrate a guaranteed income of €12,700 a year (including State pensions). If you were unable to meet this minimum, you had to do one of two things. Either transfer €63,500 to an Approved Minimum Retirement Fund (AMRF) or purchase an annuity. Bringing up your level of guaranteed income to the minimum amount.
This specified income requirement has now been removed.
In effect, this means that there is no longer a need to have an AMRF product available. The entire pension fund can be transferred into an ARF with no limits to the amount drawn down every year. There are specific rules associated with ARFs in relation to drawing down money and the tax implications of this.
What are the choices now?
There are now two specific choices when it comes to your retirement options. You can invest in an annuity or investing in an ARF. Different criteria apply to both options and your pension must meet certain eligibility requirements.
What happens to my existing AMRF?
Where you already made a decision in relation to your retirement funds you may have an AMRF. If that is the case then this will automatically be converted to an ARF. Your product provider will be in contact with you to confirm the new arrangements.
Having spend time and effort to build your pension, how to use that to fund your retirement is an important decision. There is no single right way. You need to assess the options available and your own financial needs.
We are happy to help if you have any further questions in relation to this important change or need guidance on your options as retirement approaches. Just get in touch for a chat.
18 January 2022