Approved Retirement Funds

Approved retirement funds were introduced in 1999. They are an entity into which a pension fund may be paid on retirement or at the relevant normal retirement age.  The holder is owner of the ARF funds and has a discretion as to when to drawdown funds. The ARF must be held with a qualifying fund manager.  A wide range of financial services institutions may provide and manage the ARF.

ARFs provide an alternative to the purchase of an annuity on retirement for most classes of pension holders. The purchase of an annuity from an insurance company from the pension fund, had been formerly mandatory in all cases. An annuity guarantees a fixed income for life with some alternatives.  As with ARFs, tax is payable in the income received by the annuity holder.

The assets of the ARF are beneficially owned by the pension holder. ARFs may be the subject of pension adjustment orders in matrimonial and family proceedings.  On the death of the beneficiary /owner, the assets in the fund pass to his successors.   The fund can be drawn down at any time.

The owner determines the rate at which the fund is drawn down. There is an incentive to leave funds within the ARF, as returns accumulate tax free.  An immediate drawdown would cause high marginal tax rates to apply.

ARFs are subject to taxation on drawdown. The qualifying fund manager must deduct tax at the highest rate unless a certificate of tax credits and allowances is furnished. Apart from this, a lower  withholding tax rate applies to drawdowns. The drawdowns are income in the hands of the ARF holder and are taxable as such. Credit is given for the withholding tax.


As originally enacted, Approved Retirement Funds, were available only to personal pension holders and certain proprietary directors of companies which operated occupational pension schemes. All personal pensions and qualifying occupational pension schemes since 1999, must provide an option for transfer to an ARF.  In relation to policies and schemes which predate the legislation, the matter may be agreed with the relevant administrator.

Retirement annuity contract (personal pension) holders and PRSA holders may establish an ARF. A 5% proprietary director in an occupational scheme (including a defined benefit scheme) may transfer his pension funds to an ARF. AVC’s may be paid to an ARF.  A fund transfer certificate must issue from the scheme administrators setting out certain particulars.

The Finance Act 2011 permitted members of defined contribution occupational pension  schemes, to establish and to take pension funds into an ARF. This was a very significant extension of availability, and had been proposed in the National Pensions Framework.


It is a condition of access to an Approved Retirement Fund that the pension beneficiary establishes an Approved Minimum Retirement Fund if his specified income is below a certain amount. The purpose is to reduce the risk that a person may draw down his entire fund too early.

The Approved Minimum Retirement Fund is a fund, or part of an ARF fund, which must be held intact until the pension beneficiary reaches the age of 75, in the event and to the extent that his total income is below a certain amount.  The amount that must be retained in an AMRF is €119,800 and is adjusted from time time to reflect inflation. It was adjusted downwards during the financial crisis..

An AMRF is similar to an ARF but is subject to the condition that it may not be drawn down before the age of 75 years, on the person’s earlier death or upon the person having income more than a specified amount.  The relevant amount as of 2013 is €119,800. The specified income is €18,000 and is adjusted in relation to the State retirement pension..

Income means income secured by an annuity for life, social welfare pension and certain other pensions.  Transitional provisions apply between 2013 and 2016 in respect of the increased limit.


Where a lump sum is taken on retirement, the balance may be applied towards an ARF, eligible pension beneficiaries.  The lump sum which may be taken from a scheme, personal pension, PRSA or statutory scheme, has been capped at €200,000.  Lump sums between €200,000 and €575,000 are subject to 20% tax. Sums greater than this, are subject to tax at the beneficiary’s marginal rate.

The investment returns on the funds within the ARF and AMRF accumulate tax-free in much the same way as within a pension structure.  Deposits are in most cases, exempt from DIRT.  Withdrawals from the fund are taxable income to the pension beneficiary.  The PAYE system of withholding must be operated by the qualifying fund managers.

Special rules apply to transfers of assets from ARFs on death.  They may be transferred to the ARF of a spouse free of tax.  The spouse is then taxed on drawdowns in the same way as the original beneficiary. In the case of benefits received by [a child] over 21 years, tax at 30% applies.  The tax is a one-off encashment tax, and no allowances apply. It is not inheritance tax.

There is deemed drawdown of 5% annually.  The rate is 6%, where the fund is worth over €2,000,000.  It is deemed to occur on 30 November annually to the extent that there were no distributions in the relevant year.  In effect, unless distributions of up to 5% (or 6%, where applicable) are made, they will be deemed to be made.  The deemed distribution is subject to tax, which is payable as if it was withheld.

Qualified Managers

Annuities are provided by life insurance companies. The ARF allows a wider range of providers.

Qualifying fund managers may be insurance companies, banks, building societies, credit unions, collective investment undertakings, stockbrokers or investment firms. They must register with the Revenue Commissioners in order to provide ARF and AMRF services. Funds may be moved between ARF providers.

Both Irish and EU providers, regulated under common EU standards, may provide the ARF service.  Non-Irish stockbrokers and life assurance companies who carry on business in Ireland may provide the service.  Those who are qualified to provide the service, but are outside the State, must appoint a resident in the State to undertake the tax deduction obligations.

Vested PRSA

Later legislation has introduced the vested PRSA.  This is treated in broadly the same way as an Approved Retirement Fund.  A vested PRSA is one from which withdrawals have been made.  In essence, it is a PRSA which continues beyond the retirement date and from which withdrawals may be made. The deemed distribution provisions apply to vested PRSA.

There are provisions equivalent to the AMRF which require an approved minimum fund for a vested PRSA.  The PRSA holder must retain the prescribed amount in the fund unless and until his income exceeds the specified amount. Withdrawals may not be made until after the age of 75.


It is not possible to split an ARF. However, there is no reason in principle why a person may not have one or more ARFs.

A person may have one or more PRSAs or one or more ARFs and PRSAs. Funds may be moved between ARF providers.

A tax-free lump sum may be taken on retirement between the ages of 60 and 75, in the case of employment-based PRSAs.  The lump sum may be taken from the age of 50 in certain cases and circumstances.

Distributions from ARFs

Once assets are distributed from the ARF, they are no longer subject to the privileges in relation to income tax, capital gains and inheritance tax privileges that apply within the ARF structure. They are taxed on distribution and thereafter treated as part of the general asset of the recipient.

Certain transactions entered by the ARF and AMRF with the holder or a connected person are deemed to be a distribution to the holder. They are therefore subject to tax and tax must be withheld.

Persons connected to the holder include a wide class of people, including close relatives, settlements or trusts for the benefit of the holder, close companies of which the holder is a participator, partners and companies and persons under the control or direction of the ARF holder.

Deemed ARF Distributions

Loans by the ARF to the holder or persons connected or security entered for their benefit are taxable.  The tax is based on the loan amount or the assets used as security.

The acquisition of property from the ARF holder or persons connected is deemed a distribution.  It is taxable on the value of the assets sold.  Money used to purchase a property or residence used by the ARF holder or a person connected taxable. The acquisition of movable property from the holder is a taxable distribution.

Shares acquired by the ARF in a company in which the ARF holder is a participator constitutes a distribution of funds.

Any investment of money in property used in connection with the business in which the holder is entitled or a connected person is entitled is deemed to be a distribution.  This may also apply where such an asset is subsequently used by the business. Similarly, money is used to repair or improve such a property is deemed distribution.

The Revenue has approved investment by ARFs in geared funded investment, subject to condtions. However, the general requirements, including, in particular, those in relation to liquidity,  must be satisfied.


References and Sources

Irish Books

Irish Pensions Law & Practice Buggy, Finucane & Tighe      2nd Ed (2005)  Ch.6

Pensions; Revenue Law and Practice (ITI) Dolan, Murray, Reynolds, McLoughlin (2013) Ch.4

Trustee Handbook the Pensions Authority 5th Ed 2016

Statutory Guidance the Pensions Authority (Various)


UK Books

Pensions Law Handbook 12 Ed Nabarro Nathanson Bloomsbury

Corporate Insolvency 6e: Employment & Pension Rights (6th Revised edition)

Occupational Pensions (Subscription) Lexis Nexis

Pensions Law and Practice with Precedents (Subscription) Sweet & Maxwell

Sweet & Maxwell’s Law of Pension Schemes (Subscription)

The Guide for Pension Trustees World Economics Ltd

The Guide for Pension Trustees website, you can:

Tolley’s Pensions Law Looseleaf Service (Subscription)


Pensions Act, 1990

Pensions (Amendment) Act, 1996

Pensions (Amendment) Act, 2002

Pensions (Amendment) Act, 2006

Social Welfare and Pensions Act, 2005 (Part 3)

Social Welfare Reform and Pensions Act 2006

Social Welfare and Pensions Act 2007

Social Welfare and Pensions Act 2008

Social Welfare (Miscellaneous Provisions) Act 2008

Social Welfare and Pensions Act 2009

Social Welfare and Pensions (No. 2) Act 2009

Social Welfare (Miscellaneous Provisions) Act 2010

Social Welfare and Pensions Act 2010

Social Welfare and Pensions Act 2011

Social Welfare and Pensions Act 2012

Social Welfare and Pensions (Miscellaneous Provisions) Act 2013

Social Welfare and Pensions Act 2013

Social Welfare and Pensions (No. 2) Act 2013 49/2013

Social Welfare and Pensions Act 2014

Social Welfare and Pensions (No. 2) Act 2014 41/2014

Social Welfare (Miscellaneous Provisions) Act 2015 12/2015

Social Welfare and Pensions Act 2015 (Part 3)