Q&A: Do you know your ARF from your elbow?
Q: What is an AMRF?
An approved minimum retirement fund (AMRF) is a personal tax-efficient pension fund into which you can transfer all or part of the balance of your pension fund after you receive your retirement lump sum. It is thought that around 25,000 people have AMRFs.
Q: Who can invest in one?
Retiring members of an occupational scheme and individuals that hold a personal pension, Personal Retirement Savings Account (PRSA) or retirement bond who do not have other secure pension income payable for their lifetime of at least €12,700 per annum.
Retirees with private pensions, and those with public sector pensions who have additional voluntary contributions (AVCs) and a State pension. However, most of those with an AMRF worked in the private sector.
Q: Why's it in the news?
With an AMRF, you can only withdraw 4pc of the funds each year until you reach the age of 75. But if you start to receive at least €12,700 per annum of other pension income, your AMRF turns into an Approved Retirement Fund (ARF) where all of your funds can be accessed immediately if you want to. Any withdrawal is subject to PAYE.
Q: What has changed?
Revenue updated its rules to allow the State pension Christmas bonus and living alone supplement to be taken into account as income for the purpose of meeting the €12,700 pension income test to unlock AMRF funds before age 75. This means anyone under 75 and currently receiving the maximum rate of State pension will be able to access their AMRF funds in full in December of this year after they receive the Christmas bonus on their State pension.
Pensioners with little or no income other than State pension may be able to empty their AMRF completely tax-free over a few years, using the income tax exemption relief, according to actuary Tony Gilhawley of Technical Guidance. This is because you pay no income tax over age 65 if your total income is less than €36,000 (married couple) or €18,000 (single).