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Updated: Aug 15, 2023

So, you’ve had your pension plan in place for a long time. Maybe you even have a couple of pensions from different employments. Your retirement is looming, and you are all set to take advantage of it. But what are your retirement options and what do you do with your pension fund? How do you turn it into an income for your financial security in retirement?

There are two main options to consider – an Approved Retirement Fund (ARF) and an Annuity.

illustration of a group of people for pensions - straightforward jargon-free and fully inclusive financial advice

What do these options mean?

An Annuity is a popular retirement choice as it guarantees to pay you a regular income for the rest of your life. To set it up you pay a fixed sum of money to an insurance company from your retirement fund. The income that you receive will be subject to income tax and the Universal Social Charge (USC).

An ARF on the other hand provides a way of keeping your money invested after retirement. You can withdraw from it regularly to give yourself an income, which will be subject to income tax, PRSI (up to age 66) and the Universal Social Charge (USC).

What are the main differences between an ARF and an Annuity?


A big difference between an Annuity and an ARF is that the former will give you a guaranteed income for life, no matter how long you live. However, with an ARF, this income is dependent on how the fund is invested and there is no guarantee that it will be enough to cover you for as long as you live.


An ARF gives you greater flexibility than an Annuity to make withdrawals from your account. You can do this at any time (subject to taxes), but these withdrawals will decrease the value of the ARF. An Annuity on the other hand locks you into a contract and the income you receive is decided at outset.


Your risk profile for your retirement fund is important to know before deciding on your preferred option. An Annuity not only offers a guaranteed income but can also give peace of mind in terms of protecting your pension fund from stock market volatility. An ARF is an active investment that comes with risks attached as returns will vary and fund values can fall as well as rise.


In simple terms, when the policyholder dies, the Annuity payments die with them, but an ARF will pass to the next of kin. There is no death benefit with an Annuity, but an ARF can survive the death of the owner. This makes it an attractive option if the preservation of assets is a goal.

Which option is right for me?

Like everything this will depend on your individual needs and circumstances. The type of post-retirement plan most suitable will depend on a range of factors. These include the size of your retirement fund, the level of income you are looking for in retirement, your risk profile as well as your age and health.

At the end of the day, the decision on whether to opt for an Annuity or an ARF is a personal one. We’ve helped many people understand their options and how these would suit their individual needs. If you’re approaching retirement and would like to have a chat about what’s right for you just get in touch.

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