What is an ARF?
- Wix Admin
- 13 minutes ago
- 3 min read
An ARF (Approved Retirement Fund) gives you more control over how your retirement fund is managed. An ARF allows you to remain invested in the market with the ability to control your investment and take a flexible income in retirement
An ARF allows you to keep your pension savings invested as a lump sum after you retire. Instead of converting your pension fund into an annuity (a set monthly payment), an ARF gives you the flexibility to keep more control over your funds. It's similar to having a personal investment fund dedicated to your retirement.
How does an ARF work?
An ARF works by allowing you to invest all or part of your pension fund after you retire. You access an ARF through your pension plan. Through an ARF, you can invest your savings in a wide range of asset classes like shares, bonds, property & cash. You can still withdraw from an ARF on a regular or ad hoc basis (this is subject to income tax and USC. PRSI may also apply). But it's worth remembering that since your pension fund is still invested, its value may go down as well as up.
What are the benefits of an ARF?
You can have more flexibility over your funds with an ARF
Unlike other retirement options like an annuity, an ARF gives you more flexibility to decide how much you want to withdraw and when you want to do it.
You can opt to take regular withdrawals, take lump sum withdrawals, or leave some of the funds where they are to potentially grow further. However, you are obliged to withdraw a minimum amount from your ARF each year.
Your fund can continue to grow in retirement
As your ARF can be invested in diverse assets, you can generate a return on your fund and continue to grow your savings even further. This growth however is dependent on market performance and how much you choose to withdraw from the fund.
You are in control of your fund
With an ARF you can have control over how your funds are invested. You can liaise with a financial advisor to make decisions about which assets align with your investment goals and financial needs.
What are the disadvantages of an ARF?
An ARF can offer flexibility and potential growth, but there are also some downsides to take into consideration.
Investment Risk.
As with any investment, an ARF comes with potential risks. Performance can vary and is very much market dependent. Volatility in the markets and poor investment choices can lead to unfavourable returns. This can impact your retirement savings.
Uncertain income
Unlike annuities which would have guaranteed income built in, ARFs don't guarantee a lifetime of income. The income you get from your ARF depends on investment performance. If the investments don’t perform well or if you withdraw your funds too quickly, you could deplete the value of your ARF.
What happens to my ARF after I die?
If there are still funds left in your ARF after your die, they can be left to your beneficiaries. Depending on your relationship, there are different tax implications.
Before investing in an ARF, it's important to consider your individual circumstances, your risk tolerance and the pros and cons. Seeking advice from a trusted financial advisor such as Citywide Financial can help you make an informed decision.
Get in touch if you’d like to schedule a FREE pensions consultation with one of our advisors.
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