Terms of Business Site Map Related Links

Retirement options

There are four broad options which you may have when you retire depending on your circumstances and the type of pension plan you have. The four broad options available are:

  1. A retirement lump sum
  2. An annuity
  3. Reinvesting your pension
  4. Taxable cash
Learn more with our pensions journey and our pension calculator.

Retirement lump sum

You can take part of your pension fund as a retirement lump sum. You may be able to take some or all of this retirement lump sum tax free.

Everyone has the option to take 25% of the fund as a retirement lump sum.

The balance of the fund can then be used for one or more of the following:

  • Buy a pension for life
  • Invest in an Approved Retirement Fund ( ARF ) or Approved Minimum Retirement Fund (AMRF)
  • Take as a taxable cash sum

If you have a company pension you also have the option to take a retirement lump sum of up to one-and-a-half times your final salary, depending on the length of time you have actually been employed. The balance of your pension must be used to buy a pension for life.

However your AVC fund can be used for one or more of the following:

  • Buy a pension for life
  • Invest in an Approved Retirement Fund (ARF) or Approved Minimum Retirement Fund (AMRF)
  • Take as a taxable cash sum

You may be able to take some or all of your retirement lump sum without paying any tax. The maximum tax free amount you can receive is €200,000. Retirement lump sums between €200,000 and €500,000 will be subject to standard rate income tax (20% as at March 2011).

Any retirement lump sums greater than €575,000 will be taxed at your marginal rate as income, the Universal Social Charge, PRSI (if applicable) and any other charges or levies ('tax') will also be taken.

Both the €200,000 and €575,000 limits include all retirement lump sums you have received since 7th December 2005.


Annuity

An annuity is what many people commonly refer to as a pension. The most common option at retirement is to use your accumulated pension fund to buy an annuity from an insurance company. This is a guaranteed income for the rest of your life. The amount of income you receive will be based on, among other things, your life expectancy at retirement - so will vary by retirement age and gender - and the size of your retirement fund!

Payments from your annuity are treated as income so you will have to pay income tax on it and any other taxes due at that time.


Reinvesting your pension - ARF's

With certain types of pension plan you may be able to reinvest some or all of your pension fund in an approved retirement fund (ARF) and withdraw money as you want, depending on certain restrictions. All withdrawals are treated as income so you will have to pay income tax on them and any other taxes due at that time.

The Finance Act 2011 made significant changes to the rules associated with ARFs. You can call us on 01 685 3813 for more advice on these changes and how they might affect you.


Taxable cash sum

Depending on the type of plan you have, you may be able to take the rest of your fund, after the retirement lump sum, in one go. You will need to pay income tax on this.



Approved Retirement Funds

Find out more about post retirement planning – ARF’s/ AMRF.

Contact PFP Financial on 01 6853813 or use the contact us form to discuss the options available to you.