Approved Retirement Funds (ARFs) are post-retirement investment vehicles through which individuals can invest the proceeds of their pension fund in retirement and draw cash as required. ARFs were introduced by Finance Act 1999 to provide control, flexibility and choice to holders of personal pensions and to proprietary director members of occupational pension schemes in relation to the drawing down of benefits from their pension plans. Prior to that Act, any person taking a pension from a Defined Contribution (DC) scheme or a Retirement Annuity Contract had no choice but to purchase an annuity with their remaining pension pot after drawing down the permissible tax-free retirement lump sum. The ARF arrangement extended the options at retirement so that, in addition to the annuity option, the balance of a pension fund could be taken in cash (subject to tax, as appropriate) or be invested in an ARF, subject to certain conditions.
The ARF option was extended, in Finance Act 2000, to the part of an employee’s occupational pension fund built up from Additional Voluntary Contributions (AVCs) and in Finance Act 2011 it was further extended to cover an employee’s entire pension fund where the fund is a defined contribution (DC) occupational pension scheme.
Distributions from an ARF fall within the charge to Class S self-employed PRSI, or where the recipient of a distribution is a modified class contributor, Class K.
I do not currently have plans to amend this position, however all tax measures are kept under review by my Department as a matter of course. As I announced in Budget 2018 a working group has been established to plan the process of amalgamating USC and PRSI and all aspects of PRSI will be considered by the working group.