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ITC ARF

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Approved Retirement Fund (ARF)

Who can have an ARF?

You can set up an ARF (Approved Retirement Fund) if you:

have a Personal Pension Plan OR
have a Personal Retirement Savings Account 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 and have made Additional Voluntary Contributions (AVCs).

To set up an ARF, you must have a guaranteed income or ‘specified income’ during retirement of approximately €18,000 per annum. If you do not have a specified income, you must invest approximately €120,000 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 you must lock away €120,000 (approximately) until the age of 75. At this point, the AMRF is wound up and becomes an ARF. You are free to withdraw any gains made by your AMRF investments, as an income.

What is an ARF?

An ARF is a tax-efficient post-retirement investment fund. At retirement, provided you are eligible to set up an ARF, your 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.

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

On your death, your spouse can step into your 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?

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

Why choose an ITC ARF?

1. Control

You have control over your investments. With traditional pension schemes, you can be restricted to investing in the insurance company’s own investment products. In contrast, your ARF investments can be sourced from a wide range of investment products and providers, in line with your appetite for risk.

2. Transparency

The ITC ARF charging structure is completely transparent. You will know at all times what your fund is costing you. Before you make any decision, you will be provided with details on the set-up costs. The ongoing cost of your ARF depends on your investment strategy, which is controlled by you.

You will receive annual accounts on all income and expenditure of your ARF. You will also have online access to an ARF operating bank account where you will be able to monitor all movement of funds to and from your ARF investments.

3. Flexibility

An ITC ARF lets you choose when and how much you withdraw as an income from your fund.

4. Security

Your ARF funds are held in your 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 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.