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Have you taken retirement benefits from a Personal Pension, Personal Retirement Savings Account (PRSA) or Personal Retirement Bond (PRB) in the last few years? If so, it is possible that part of your fund was placed in an Approved Minimum Retirement Fund (AMRF) policy, from which you can access a maximum of 4% of the fund value annually. If you are in receipt of the full rate of State Contributory Pension it is possible that you can now access more of your AMRF plan if you wish.

Traditionally, the only option for taking retirement benefits from a private pension plan was to take as much of a tax free lump sum as you were allowed and purchase a regular pension for life (or Annuity) with the balance. The Finance Act of 1999 introduced a more flexible system whereby you could invest the balance of your fund in an Approved Retirement Fund (ARF) with an insurance company. From there you could access the fund as you wanted, rather than having a guaranteed income for life. Also, any remaining fund value would be treated as part of your estate after you died.

The legislators realised however that this could lead to people depleting their retirement fund too quickly, especially if it was accessed prior to State Pension Age. They therefore insisted that a portion of the fund (currently the first €63,500) had to be placed in an AMRF, which could not be accessed unless you had a certain level of pension income guaranteed for the rest of your life (currently €12,700 per annum) or until they reach the age of 75. More recently, the rules were tweaked to allow you to access 4% per annum of the AMRF if you wish.

Overall, the ARF/AMRF option is excellent for people who have large retirement funds. However, there are many people who had much less than €63,500 remaining in their fund after they had taken any eligible tax free cash. Many of these people would prefer to have more flexibility in how they access a smaller fund instead of leaving it untouched, or accessing tiny portions of it, until they are 75.

The Contributory State Pension was increased in March this year to €12,695 per annum, tantalisingly close to the €12,700 threshold required to allow an AMRF to become an ARF and benefit from more flexible drawdown options. Insurance companies realised that the reintroduction of the Christmas Bonus on Social Welfare payments would push AMRF holders who are on the full rate of Contributory State Pension over this ARF threshold. They have therefore lobbied the authorities to allow this bonus to be included as guaranteed pension income and this has recently been accepted.

To summarise, if you have an AMRF policy in place and are in receipt of the full rate of Contributory State Pension, it can now become an ARF and you can access the policy value in any way you want as taxable income. Please bear in mind that this may be a temporary situation, as the €12,700 threshold can be increased at the Government’s discretion.

If you think this may be an option for you I recommend you talk to a good Financial Advisor who can guide you through this process.

Sean Sweeney, QFA RPA is a Qualified Financial Advisor and Retirement Planning Advisor. You can contact him through John F. Loughrey Financial Services by telephone on 074-9124002 or by email on sean@jfl.ie