Options at retirement:

While not everyone has the same options at retirement, to keep this simple, typically a retiree who has built up a pension fund can do the following:

  1. Claim a tax free lump sum.
  2. Option to take an additional lump sum and pay tax on it.
  3. Choose to invest the balance of your fund in an Annuity, AMRF or ARF (don’t worry, we’ll explain these terms below)

Tax Free Lump Sum

Private pensions:  (i.e. Personal Pension Plans and PRSA’s that are not linked to a company scheme)

  • 25% of your fund balance can be claimed as a tax free lump sum.
  • Maximum lifetime limit of €200,000.

Occupational Pensions Scheme / Company Pension,

  • 25% of your fund balance or up to 1.5 times your final salary.
  • Maximum lifetime limit of €200,000.
  • The size of your lump sum will depend on your years of service under that scheme & by the scheme rules.
  • Due to scheme rules & years of service, working this out can be a little more complicated, so it’s probably best to have a chat with one of our Pension experts, who can calculate this for you.

Taxable Lump Sum

  • You have an option to take an additional lump sum and pay tax on it.
  • Currently, you can withdraw up to €300,000 as a taxable lump sum and pay tax at 20%.

Choose your pension type

There are three options for the remaining funds, after you take your lump sum:

  1. Buy an Annuity
  2. Invest in an Approved Minimum Retirement Fund (AMRF)
  3. Invest in an Approved Retirement Fund (ARF)

If you are retiring at the state retirement age (and qualify for the full state pension), you can skip the AMRF option & choose an Approved Retirement Fund (ARF) which is more flexible or an annuity.


  • An annuity is an income for life. You use the balance of your pension fund to buy a guaranteed income for life from a pension provider.
  • Once you purchase the annuity, you’ll get an income until you die but you won’t have access to the pension fund anymore.

Approved Retirement Fund (ARF)

  • An Approved Retirement Fund continues to invest your money after you retire.
  • You draw an income from the fund and you can increase or decrease the amount you withdraw per year depending on your requirements (subject to a minimum of 4% of the fund value per year).
  • When you die, any remaining funds in your ARF are left to your estate.

Approved Minimum Retirement Fund (AMRF)

  • If you are not in receipt of the state old age pension (perhaps because you are retiring early) or if you do not have a guaranteed income for life of €12,700 per year you can opt for an AMRF instead of an annuity.
  • You have an option to invest €63,500 into an Approved Minimum Retirement Fund & the balance into an ARF.
  • You cannot access the AMRF until age 75 or until you satisfy the income rule.
  • You can access the funds in the ARF when you retire.

While these options have their own merits, there are some downsides for each that you need to also consider.  Our qualified pension experts can help you weigh up the pro’s and con’s of each option.

What’s the next step?

Advantages & Disadvantages of Annuities & ARFs

Guaranteed Annuity – Advantages   Approved Retirement Fund – Advantages
Provides for an income for the whole of your life.


There is total flexibility you can draw down as much you like or as little as you like to a minimum of 4% of fund.
There are many annuity options for all different types of clients, for example you can allow for a Spouse Annuity in the event of your death, you can also protect it against inflation. On Death of the ARF owner, funds will be go to surviving spouse or to the deceased’s estate. Therefore unlike the Annuity the capital sum is not lost.
Safe and easy option to understand, the client does not have to worry about investment risk or charges or market movements The ARF can be used to purchase an annuity at a later date, some good flexibility especially if annuity rates are poor at the time of retiring.
No investment risk, you are investing in the provider giving you the annuity without defaulting, this is where the strength of the provider chosen is important. Within your ARF you have wide selection of investment choices to best suit your apetite for risk and return. You can change these at anytime to suit your most current attitude or current market movements.
Guaranteed Annuity Disadvantages   Approved Retirement Fund Disadvantages
The price of your annuity is correlated to long term fixed interest rates on the day you retire or purchase the annuity. So you are depending on the market in what you receive for long term retirement income. Bomb out risk of your funds. Poor performance in the fund coupled with your regular drawdowns of pension income can cause your fund to run out sooner than expected.
If you do not protect your annuity against inflation then your value for money will in turn be eroded over time. Managing your fund – you as the owner still have to keep an eye on your ARF, you need to regularly review this with your adviser. Some clients just don’t want the stress or hassle this causes.
Once you purchase the annuity with your pension capital sum you can never access that money again. An Annuity cannot purchase an ARF. Your ARF is an investment, some clients find anything linked to the market and its volatility too stressful to deal with.
If you do not choose a guaranteed period at the outset or a spouses annuity or you are single, on death your annuity will die with you. Unlike an Annuity, there are no guarantees with an ARF and the investments that lie within. Diversification of your investments is key here.


What’s the next step?