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ITC ARF

ITC SSAS ITC SIPP ITC ARF ITC PRSA

Approved Retirement Fund (ARF)

Who can have an ARF?

Your client can set up an ARF (Approved Retirement Fund) if they:

have a Personal Pension Plan OR
have a Personal Retirement Savings Plan OR
are a member of an employer-sponsored pension scheme and are a director with more than 5% voting rights in the company OR
are a member of an employer-sponsored pension scheme who has made Additional Voluntary Contributions (AVC).

To set up an ARF, your client must have a guaranteed income or ‘specified income’ during retirement of approximately €18,000 per annum. If they do not have a specified income, they must invest €120,000 (approximately) in one of the following:

an Approved Minimum Retirement Fund (AMRF) OR
an annuity (an annual income from an insurance company)

An AMRF is exactly the same as an ARF, except that your client must lock away €120,000 (approximately) until the age of 75. At this point, the AMRF is wound up and becomes an ARF. Your client is free to withdraw any gains made by the AMRF investments, as an income.

What is an ARF?

An ARF is a tax-efficient post-retirement investment fund. At retirement, provided your client is eligible to set up an ARF, their options are to take a tax-free lump sum of 25% of the value of the pension fund AND (subject to the AMRF requirement):

transfer the remaining funds to an ARF, OR
take a taxable lump sum

An ARF is provided by a Qualifying Fund Manager, such as Independent Trustee Company.

Your client can draw a regular income from the ARF to suit their needs. Once they have satisfied the AMRF requirement, there is currently no upper limit to the level of withdrawals that can be made. If your client is aged 61 or over and they do not make a withdrawal during the year, they will be obliged to withdraw at least 5% of the fund (called an imputed distribution). All withdrawals from the ARF are subject to income tax, PRSI, and income and health levies as appropriate.

On death, the spouse can step into their shoes and take over the ARF tax-free. They can continue to manage the ARF investments and make withdrawals from the ARF as they wish. On the death of this spouse, the ARF must be wound up. The assets of the ARF will pass to the estate. Inheritance and/or income tax charges will be applied.

What are the benefits of an ARF?

Your client has the choice to invest their funds in investments that fit their appetite for risk.
Your client has access to a wide variety of investment options and providers.
Your client’s investments can grow free of both income tax and capital gains tax.
Your client chooses when they withdraw an income from their fund and how much to take, according to their needs.
Upon death, your client’s funds are passed to their estate. There is no immediate loss of capital, as there would be with an annuity.

Why choose an ITC ARF?

1. Control

Your client has control over their investments. With traditional pension schemes, a client may be restricted to investing in the insurance company’s own investment products. In contrast, ARF investments can be sourced from a wide range of investment products and providers, in line with the client's appetite for risk.

2. Transparency

The ITC ARF charging structure is completely transparent. You and your client will know at all times what the ARF is costing. Before any decision is made, you and your client will be provided with details on the set-up costs. The ongoing cost of your client’s ARF depends on their investment strategy, which they control.

Your client will receive annual accounts on all income and expenditure of the ARF. Your client will also have online access to an ARF operating bank account where they will be able to monitor all movement of funds to and from their ARF investments.

3. Flexibility

An ITC ARF lets your client choose when and how much they withdraw as an income.

4. Security

Your client’s ARF funds are held in their own unique unit trust which is completely separate from the assets of Independent Trustee Company. This means that, if Independent Trustee Company were to fail, your client’s ARF assets are ring-fenced and safeguarded from any liability relating to another ARF owner, or the ARF provider.

In contrast, the assets of an insurance company's ARF are usually held on the balance sheet of the life-assurance company. If the life-assurance company collapsed, the ARF investor would have no protection as the remaining ARF assets would become assets of the insurance company and would be available to pay all policyholders.