The Finance Bill was published yesterday, and brings in a change in tax rules relating to Approved Retirement Funds (ARFs). In 2011, the government increased the “imputed or notional distribution of assets” to 5%. This is the amount Revenue assumes a person will draw down from their ARF each year, and it is the amount which is taxed each year, regardless of whether or not it is taken from the fund.
However, taxation at 5% means that the fund would be fully used in 20 years. With people now living much longer, and enjoying 25+ years of retirement, there was a strong chance that ARF owners could outlive their retirement funds. This could potentially cause financial uncertainty and difficulty for an individual in their final years.
The Finance Bill has reduced the imputed drawdown rate to 4%, meaning an ARF will now last for 25 years after retirement. To find out more about ARFs, and other pension options, visit our Retirement, or contact us on (042) 935 2287 to discuss your retirement options.