The Orca Financial Guide to understanding Approved Retirement Funds (ARFs)

Pensions can be complex products, so it is important to get the right financial advice. At Orca Financial we will take you through all your pension options and explain ARFs in detail, so you’ll have plan in place that suits your needs perfectly, and offers maximum tax efficiencies.

What are ARFs?

An Approved Retirement Fund (ARF) is a personal retirement fund where you can keep your money invested as a lump sum after retirement. You can withdraw from it regularly to give yourself an income, and any money left in the fund after your death, can be left to your next of kin.

An ARF invests in various assets such as shares, property, bonds and cash, so the growth of your ARF fund depends on the performance of the assets it is invested in. These funds are designed to increase in value, but your original investment is not guaranteed. Your ARF can run out during your lifetime if you make large, regular withdrawals from it, if investment returns are less than those projected, or if you live longer than expected.

Who can invest in an ARF?

Investing in an ARF may be an option if you are self-employed, a proprietary director, or if you have a PRSA. Members of a defined contribution employer pension plan, you may also have this option, depending on the rules of that particular pension plan.

Tell me about taxes and charges.

Growth from your ARF is tax-free, but withdrawals from it are subject to income tax, PRSI and Universal Social Charge (USC).

If you do not withdraw any money from your fund, Revenue will assume that you have withdrawn 4% each year and income tax and USC on this 4% will be taken from your fund each January. So you will be charged tax whether you have taken an income or not.

Yearly management charges also apply. As these are taken directly from the fund, they reduce the value of any growth in the fund.

What is an Approved Minimum Retirement Fund?

An Approved Minimum Retirement Fund (AMRF) is similar to an ARF, except you cannot withdraw any of your original capital until you reach 75. Until then, you have the option of withdrawing up to 4% of the value of your fund (less charges, of course).

Advantages of ARFs

  • You keep control of your retirement money. This may be important if you are in poor health or want to leave this money to your dependants after you die.
  • You can decide when and how much to withdraw from your ARF.
  • You can choose how your ARF is invested.
  • Any growth in your ARF is tax-free.
  • You can use your ARF to buy an annuity later on, should you decide that you need a secure, regular income.

Disadvantages of ARFs

  • Your retirement money is not guaranteed to keep its value, as the assets in which your ARF is invested may not perform as well as expected.
  • There is a risk that the ARF could run out in your lifetime.
  • You will have to pay for any ongoing investment advice about your ARF.
  • Some ARFs have high management charges, which will reduce the value of your fund.

Annuity or ARF?

If you have to choose between an annuity and an ARF, it is important to weigh up the pros and cons of both. Consider your personal circumstances as they are now, and how they are likely to be in the future. Remember we can help you make the decision that’s right for you.

For a better understanding of ARFs,
call Orca Financial on 01 2103030
or email

Approved Retirement Funds Department