Your Options at Retirement

Deciding on how and when to take your retirement will be one of the biggest financial decisions of your life. We will help you assess all options available to you and work with you to ensure you decide on the best options available to you.

The options you have at retirement can be complicated and technical and it is very important that you seek advice from a Financial Broker to help you make sound decisions on your retirement plans.

Options at Retirement – The Basics

Your options can depend on the pension product you are invested in:

Retirement options Matrix

The table below shows the retirement options that are available depending on what pension contract your client may be investing in.

Pension Type	Option 1: Salary & Service	Option 2: ARF Routh
Personal Pensions
PRSAs
DC Company Pension Scheme
DB Company Pension Scheme - Employee
DB Company Pension Scheme - Proprietary Director
Buy Out Bonds from DC & DB schemes

There are 2 Options for at retirement for those in a Company pension scheme

Under the Salary & Service route clients can choose to take a retirement lump sum of up to one and-a-half times final salary, depending on the length of time they have actually been employed.

They need 20 years service with the same employer continuing up to normal retirement age in order to receive the maximum 150% of final salary. The rest of the fund is used to buy a pension for life.

However if they have also been making AVCs or PRSA AVCs, this can be used for one or more of the following.

BUY AN ANNUITY
INVEST IN AN ARF OR AMRF (OR REMAIN INVESTED IN YOUR VESTED PRSA AVC)
TAKE AS A TAXABLE CASH SUM
A COMBINATION OF THE ABOVE

Option 1: ARF Route

Under the ARF route your client has the option to take 25% of the fund as a retirement lump sum. With the rest of the fund they have the following options:

BUY AN ANNUITY
INVEST IN AN ARF OR AMRF (OR REMAIN INVESTED IN YOUR PRSA)
TAKE AS A TAXABLE CASH SUM
A COMBINATION OF THE ABOVE

Annuity or ARF ? Summary of Advantages and Disadvantages of Annuities and ARFs.

ANNUITIES

AMRFS AND ARFS

ADVANTAGES

Annuities provide certainty.
The individual is paid a known pension for the rest of their life.
The following options are available at an additional cost.
The pension payment can have a guaranteed period for up to 10 years regardless of whether the individual dies within that period.
A spouse’s, civil partner’s or dependent’s pension in the event of death and is paid for the life of the dependent.
Inflation protection.

Gives the individual flexibility and control over their pension fund during retirement.
They can choose the level of income withdrawals they want to take each year, however, depending on age, a minimum income of 4% or 5% of the value will be paid every year. Where individuals have funds over €2m a rate of 6% applies. This applies to ARF clients from the year they turn 61 or age 60 for those born 1 January. It will also apply to AMRFs when they become ARFs.
ARFs can invest in a wide range of assets, with the potential for the fund to continue growing.
On death the fund value at that date passes to the estate.
AMRFs and ARFs can be used to purchase an annuity at any stage. It would be expected that the older the dent the higher the annuity rate will be.

DISADVANTAGES

Annuity rates are linked to longterm interest rates and life expectancy. When interest rates reduce and life expectancy increases then annuity rates would be expected to fall.
The annuity rate is fixed at the time the annuity is purchased and is not affected by later changes in interest rates or life expectancy.
The individual’s pension fund no longer exists because you have changed it into an income for life.
Lack of flexibility, the options chosen under the annuity cannot be changed once its purchased.
The pension income will stop on death, unless the individual chose a dependent’s pension or guaranteed period.
The cost of all the options, i.e. inflation protection, dependent’s pension will reduce the annuity income that is payable. The amount of this reduction will depend on the individual’s particular circumstances.

If the individual takes an income from their fund there is a high risk that their fund may not provide an income for the rest of their lifetime and the fund may be depleted before they die. This may be due to poor fund performance and / or if they take excessive levels of income from the fund.
The individual is taking on investment risks. This means that the initial capital could go down as well as up.
The individual may have to put at least €63,500 in an AMRF if they do not have a guaranteed pension income of at least €12,700 a year currently in place.
From the year the individual turns 61 (age 60 for those born 1 January) they must take a minimum level of income from the ARF every year. Currently this is 4% of the value of the fund. This rate increases to 5% from the year the individual turns 71 or age 70 for those born 1 January. Where individuals have funds over Elm a rate of 6% applies. This will also apply to AMRFs once they become ARFs. These three rates may change in the future.

Warning : If you invest in an AMRF you will not have access to your initial investment amount until age 75.

Warning : The value of your investment may go down as well as up.

Warning : The Income you get from this investment may go down as well as up.

The information and figures stated are correct as at September 2016. All income/withdrawals are subject to tax
at your highest rate on withdrawal, Universal Social Charge, PRSI (if applicable) and any other charges or levies
(tax) applicable at that time.