Home Services Financial Advisory Services Retirement Planning Approved Retirement Fund (ARF)


Approved Retirement Fund (ARF)

An ARF is a post-retirement investment fund. It is an alternative to buying an annuity, i.e. an annual income with your pension fund at retirement. All members of defined contribution pension arrangements can now avail of the ARF option at retirement.

Tax treatment of an ARF

An ARF is a tax-free investment structure and investments held within the ARF are allowed to grow free of tax. Only when funds are drawn from an ARF will a tax liability arise for the ARF investor.  Funds drawn from an ARF will be liable to income tax in the same way a salary is liable to income tax and the ARF provider is under an obligation to deduct income tax under the PAYE rules; effectively the ARF investor becomes an employee of the ARF provider in respect of the income taken from the ARF. It is compulsory to draw down a minimum of 5% per annum from the ARF. Should the value of the ARF exceed €2 million then the deemed drawdown requirement is 6% per annum on the entire value of the ARF (the value of any vested PRSA that the ARF holder may have also needs to be included for this purpose). The obligatory drawdown in respect of ARF investments will only apply where an ARF investor is aged 61 years or over at December 31.

Options at retirement

At retirement the pension fund holder is entitled to a tax free lump sum. With the remaining balance of the pension fund the holder can invest in an ARF.

If the pension fund holder elects to invest in an ARF at retirement there is a requirement that they must be in receipt of a guaranteed income for life of at least €12,700 per annum. Where an individual does not have this guaranteed income amount in retirement, the minimum amount after the lump sum that must be invested in an AMRF or an annuity or a combination of both is the lesser of the fund value and €63,500.


An Approved Minimum Retirement Fund (AMRF) is very similar in nature to an ARF, i.e. the funds can be invested in any number of ways. An AMRF cannot be accessed until age 75 with the exceptions outlined below.

Timing of Minimum Income Limit

 An AMRF can at any time become an ARF when the holder has the minimum annual income requirement of €12,700 at that time. An AMRF will automatically become an ARF when person reaches age 75.

Tax treatment of ARF on death

The tax treatment of an ARF on death will depend on whom the ARF/AMRF assets are being passed to.  A spouse can ‘step into the shoes’ of a deceased ARF investor and take over the ARF in their name without any income tax or capital acquisitions tax liability arising.  Any drawdown of income from the ARF by the surviving spouse will be liable to income tax in the normal manner. The tax liability of an ARF passing from the original ARF investor to a child or from a surviving spouse’s ARF to a child will depend on the age of the child receiving the ARF assets:

  • Where the ARF assets pass to a child under the age of 21 the proceeds will be liable to Capital Acquisitions Tax in the normal manner.
  • Where the ARF assets pass to a child aged 21 or over the proceeds will be liable to income tax at a flat rate of 30%. 

Where the ARF assets pass to anyone other than to a surviving spouse or child, an income tax liability will arise for the ARF investor in the year of death, and the net proceeds passing to the beneficiary will be liable to Capital Acquisition Tax.