Retirement options: lump sum, ARF or annuity, chosen on the figures

Retiring soon, you decide how much to take as a lump sum and what to do with the rest. Already retired, you want to know your ARF is invested well and the income will last. A senior financial advisor paired to you sets out every option in euro and builds a cash-flow plan to age 100 around your choice.

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Your pension options

Get your retirement options reviewed

Two minutes online. Tell us whether you are retiring soon or already retired, and roughly what your pensions are worth. A senior financial advisor is in touch with your options in euro.

  • No documents needed, ballpark figures are fine
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  • Whole of market: every main Irish provider compared
30,000+clients across Ireland
4.9 Google rating
Your pension optionsStep 1 of 5

Which describes you?

Tax relief, contribution limits and the right plan differ between the three.

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Retiring soon or retired

Two different questions, one plan

If you retire in the next few years, the decisions come in order. First the lump sum, then what to do with the rest of the fund: an ARF, an annuity, taxable cash or a mix. The lump sum you choose can decide which options stay open, and an annuity cannot be undone once bought.

If you have already retired, the decision is made and the question is whether it still works. Is your ARF invested to match the income you take from it? Is the drawdown rate one the fund can sustain to age 100? Are the charges in line with the rest of the market?

Either way, your own senior financial advisor sets out the figures in euro, with the tax on each option, and builds the plan around them.

  • Retiring soon: lump sum, ARF, annuity and the mix compared
  • Already retired: your ARF's funds, charges and drawdown rate reviewed
  • ARFs from every main Irish provider compared
  • A year-by-year cash-flow plan to age 100

Your tax-free lump sum

Most people take a retirement lump sum first. From a PRSA or personal pension it is up to 25% of the fund. In a company scheme you can usually choose between 25% of the fund and an amount based on salary and service, up to 1.5 times final salary with at least 20 years' service. Choose the salary route and the rest of a defined contribution fund has to buy an annuity. The 25% route keeps the ARF open.

The first €200,000 is tax free. The next €300,000 is taxed at the standard rate of 20%, and anything above €500,000 is taxed as income at your marginal rate. The €200,000 is a lifetime limit: it counts every retirement lump sum you have taken since 7 December 2005, across all your pensions.

Retirement lump sums in your lifetimeTax
Up to €200,000None
€200,001 to €500,00020%, the standard rate
Above €500,000Taxed as income at your marginal rate

What people usually do with it:

  • Clear the mortgage or other borrowing, so retirement starts without repayments
  • Invest it outside the pension through a lump sum investment, matched to when the money will be needed
  • Keep part of it on deposit as a cash reserve for the first years of retirement
  • Help children or grandchildren with gifts planned around the inheritance tax rules

We look at the lump sum and the income together. Taking more cash now leaves a smaller fund to provide your income, so the right amount depends on what the rest of the plan needs.

Approved Retirement Fund

An ARF: the fund stays invested, you draw the income

An Approved Retirement Fund holds what is left after the lump sum, invested in your name with a qualifying fund manager such as a life company. You choose the funds and how much to draw, as a regular income or as one-off withdrawals. Income and gains are not taxed while they stay in the ARF. Every withdrawal is taxed as income.

Revenue assumes a minimum withdrawal each year, known as the imputed distribution, and taxes it whether you take it or not. It is 4% of the value on 30 November from the year you turn 61, 5% from the year you turn 71, and 6% once your ARFs and vested PRSAs together are worth more than €2 million.

The value can fall as well as rise, and if withdrawals run ahead of growth the fund can run out. That is why the drawdown rate matters as much as the choice of funds.

  • Invested in your name, in funds you choose
  • Income drawn when you need it, taxed through PAYE
  • A minimum of 4%, 5% or 6% a year for tax purposes
  • Passes to your spouse or civil partner, or to your estate, on death
Annuity

An annuity: a guaranteed income for life

An annuity turns all or part of the fund into an income paid by a life company for the rest of your life, however long you live. It does not move with markets and there is no fund to manage.

The income depends on the size of the fund, your age and health, interest rates and the rate each life company offers on the day you buy. The options you add change it too: a pension for your spouse or civil partner after your death, a guaranteed period of up to 10 years, and increases at a fixed rate each year. Each option lowers the starting income. Some providers pay an enhanced rate where your health qualifies.

The trade-off against an ARF is permanence. An annuity cannot be cashed in, the options cannot be changed later, and without a spouse's pension or a guaranteed period the payments stop when you die.

  • Paid for life, whatever happens to markets
  • Spouse's pension, guaranteed period and yearly increases as options
  • Taxed as income through PAYE
  • Fixed once bought, so every option is chosen with care

ARF or annuity

An ARF keeps your fund invested and lets you decide the income. An annuity exchanges the fund for an income that is certain. These are the points that decide between them.

Point to weighARFAnnuity
Income certaintyNo guarantee. Your income depends on what you withdraw and how the fund performsA fixed income for life, set on the day you buy
Investment riskYours. The value can fall as well as rise, and the fund can run out if withdrawals outpace growthCarried by the life company. Your income does not move with markets
Flexibility to vary withdrawalsRegular or one-off withdrawals, changed as your needs changeNone. The income and options are fixed at purchase
What happens on deathPasses to your spouse's or civil partner's ARF, or to your estateStops, unless you chose a spouse's pension or a guaranteed period
Tax on incomeWithdrawals taxed as income through PAYE: income tax, USC and PRSI where it appliesPayments taxed as income through PAYE
ChargesYearly fund and policy charges, which vary by provider and fundNo explicit charge. The provider's costs are built into the income rate
The imputed distributionTax due each year on at least 4%, 5% or 6% of the value, whether you draw it or notDoes not apply
Who each suitsPeople with other income or assets who want control of the investments and the withdrawals, and to pass the fund onPeople for whom the fund is the main source of income and who want certainty rather than investment risk

Worked example: a €1 million PRSA at 66

Mary is 66 and retiring. She has a PRSA worth €1,000,000 and has never taken a retirement lump sum before.

  • She takes 25% as a lump sum: €250,000. The first €200,000 is tax free and the next €50,000 is taxed at 20%, so the tax is €10,000 and she receives €240,000.
  • The other €750,000 goes into an ARF. She is over 60 for the whole year, so Revenue treats at least 4% as withdrawn each year: €30,000 on a value of €750,000 on 30 November. Withdrawals of €30,000 or more in the year cover it.
  • From the year she turns 71 the minimum rises to 5%: €37,500 on the same value.
  • Her ARF withdrawals are taxed as income through PAYE alongside her State Pension, which is up to €299.30 a week in 2026 and €309.30 from January 2027.
  • If she used part of the €750,000 to buy an annuity, the income would depend on her age, the options she chose and rates on the day. We put live quotes beside the ARF figures before she decides.

Figures assume no earlier retirement lump sums and are illustrative. The value of an ARF can fall as well as rise.

Your options depend on the pension you hold

Company scheme members, PRSA holders and personal pension holders reach retirement with different rules. You can combine options: part of the fund can buy an annuity at retirement with the balance going to an ARF, and an ARF can be used to buy an annuity at any later date. With more than one PRSA or personal pension, you can make a different choice for each. Company pensions from the same employment must all take the same option, though AVCs can be treated separately.

Your pensionWhen you can draw itLump sumThe rest of the fund
PRSAFrom 60, or from 50 on retiring from a jobUp to 25% of the fundARF, annuity, taxable cash, or keep it invested in the PRSA and draw from it
Personal pensionFrom 60 and before 75Up to 25% of the fundARF, annuity or taxable cash
Company scheme, defined contributionNormal retirement age, usually 60 to 70, or from 50 with consent25% of the fund, or up to 1.5 times final salary with 20 years' service25% route: ARF, annuity or taxable cash. Salary route: an annuity
Company scheme, defined benefitNormal retirement age, usually 60 to 70, or from 50 with consentSet by the scheme rules, in exchange for a smaller pensionA pension from the scheme. AVCs can go to an ARF, and directors with more than 5% of the votes can use the ARF route for all of it
AVCsWhen you take benefits from the main schemeWithin the main scheme's limitsARF, annuity or taxable cash, subject to conditions we check
Personal retirement bondNormal retirement age, usually 60 to 70, or from 50 having left the jobUp to 25% on the ARF routeARF, annuity or taxable cash, whether the bond came from a defined contribution or defined benefit scheme
Already retired

Drawing an income already? Have it reviewed

An ARF set up five or ten years ago was built for the markets, rates and plans of that time. A review checks it against your life now.

We look at how the ARF is invested against the income you take, and whether that drawdown rate is one the fund can sustain to age 100. We compare your charges with other providers, check the tax on your withdrawals alongside the State Pension, and see whether ARFs held with different providers should be brought together. Where certainty now matters more, we show what part of the ARF would buy as an annuity. Our pension review covers every pension and ARF you hold.

  • Funds checked against the income you take
  • Drawdown rate tested to age 100
  • Charges compared across the market
  • Who inherits the ARF, and the tax they would pay
State Pension

The State Pension alongside

The State Pension (Contributory) is paid from 66 and is not means tested, so your ARF, annuity or lump sum does not reduce it. The maximum personal rate is €299.30 a week in 2026, rising to €309.30 from January 2027 under Budget 2027. The full rate needs 2,080 full-rate PRSI contributions.

If you were born on or after 1 January 1958, you can choose to start it at any date between 66 and 70, and a higher rate is paid if you start it later than 66. It is taxable, so we build it into the tax on your pension income and into the timing of your ARF withdrawals.

  • Paid from 66, or later by choice up to 70
  • Not affected by your private pension
  • Taxable, and planned in with your other income
  • Your contribution record checked before you decide
How we work

Every provider compared, a plan to age 100

True Wealth is a whole of market broker based in Portlaoise, with more than 30,000 clients and a 4.9 Google rating. We compare ARFs from Irish Life, Zurich, Aviva, New Ireland, Standard Life and Royal London on charges, fund range and service, and get annuity quotes from the life companies writing them on the day you decide.

Then your own senior financial advisor builds a cash-flow plan to age 100: your pensions, the State Pension, tax, spending and what you want to leave, year by year, tested against weaker markets. It sits inside your wider personal financial planning, and our cash-flow modelling page shows how the forecast works.

  • ARFs compared across six Irish providers
  • Live annuity quotes beside the ARF figures
  • A cash-flow plan to age 100
  • Reviewed with you every year
What happens next

How it works

1

Tell us where you are

The form on this page: retiring soon or already retired, and roughly what each pension or ARF is worth.

2

We gather the details

Benefit statements, ARF values, funds and charges from each provider, with your permission.

3

Your options in euro

Lump sum, ARF, annuity and the mix, with the tax on each, set side by side.

4

Your plan to age 100

A year-by-year cash-flow plan with the State Pension, your spending and your family's needs.

5

Set up

Providers compared across the market, the paperwork handled with the trustees or provider.

6

Reviewed every year

Funds, drawdown rate and tax checked against the plan as markets and rules change.

How your retirement income is taxed

The lump sum

The first €200,000 of retirement lump sums in your lifetime is tax free. The next €300,000 is taxed at the standard rate of 20%, and anything above €500,000 is taxed as income at your marginal rate. Lump sums taken since 7 December 2005 count towards the limit.

ARF withdrawals and the imputed distribution

Every withdrawal from an ARF is taxed as income through PAYE: income tax, USC and PRSI where it applies. Income and gains are not taxed while they stay in the ARF. Each year Revenue treats a minimum amount as withdrawn, based on the total value of your ARFs and vested PRSAs on 30 November:

  • 4% where you are 60 or over for the whole year, in practice from the year you turn 61
  • 5% where you are 70 or over for the whole year, from the year you turn 71
  • 6% of the whole value where the total is more than €2 million

If you withdraw less than the minimum, tax is deducted on the difference. With ARFs at more than one provider, you can nominate one of them to work out the figure on the total.

Annuity income and taxable cash

Annuity payments are taxed as income through PAYE. If you take the balance of the fund as cash instead of using an ARF or an annuity, it is taxed as income in the year you take it, so on a large fund most of it falls at the higher rate.

The standard fund threshold

The standard fund threshold is the limit on the total value of pension benefits you can draw with full tax relief. It is €2.2 million in 2026, rising to €2.4 million in 2027, €2.6 million in 2028 and €2.8 million in 2029, then moving with average weekly earnings from 2030. Where benefits taken since 7 December 2005 exceed it, the excess is taxed at the higher rate of income tax, currently 40%, when the benefit is taken. Budget 2027 also revises, from 1 January 2027, the factors used to value defined benefit pensions against the threshold. If your pensions are close to it, the order and timing of benefits matter.

On death

An ARF transferred to your spouse's or civil partner's ARF carries no income tax and no inheritance tax. A child under 21 pays no income tax on it, though inheritance tax may apply. A child aged 21 or over pays income tax at 30% and no inheritance tax. Anyone else pays both. Our estate planning page covers passing on the rest of your wealth.

30,000+clients advised by True Wealth
4.9Google rating from our clients
€200,000lifetime limit on tax free retirement lump sums
€2.2mstandard fund threshold in 2026
Google reviews

What clients say about their advisor.

Read all Google reviews
We (Richie and Nickey) received excellent pension advice that was clear, honest, and tailored to my situation. Everything was explained in a way we could easily understand, and we felt confident making decisions about my future. Highly professional service and very reassuring throughout the process.
RO
Richard O NeillPension advice
They made setting up a company pension on a deadline extremely easy and stress free. You can tell they understand the products inside out. Very approachable, great availability for support with instant and clear answers.
MK
Mairead KilbrideCompany pension
True Wealth was super efficient in locating my UK pension. They were very professional and responsive in dealing with the relevant pension organization. I would highly recommend True Wealth.
BW
Bridget WhooleyUK pension trace
Thank you for the several calls to advise me. Great client attention! Eimear is fantastic! I had my pension sorted and a few insurances arranged. All the best.
RD
Renan DevitaPension and protection
Excellent service. Always there if I had any questions, would recommend without hesitation. A 5 star service. Thank you everyone.
AH
Anthony HGeneral
Questions

Frequently asked questions

Straight answers with the figures. If yours is not here, a senior advisor answers it in your review.

I retire in the next year or two. What should I be deciding now?

The order of the decisions. The lump sum you choose can decide what is open for the rest of the fund: in a company scheme, the salary-based lump sum means the rest buys an annuity, while the 25% route keeps the ARF open. We set out the lump sum, an ARF, an annuity and the mix in euro, alongside the State Pension, and build the cash-flow plan before anything is signed. The Department of Social Protection recommends applying for the State Pension six months before you want it to start.

I already draw an income from an ARF. What does a review look at?

Whether the plan still works. We check how the ARF is invested against the income you take, whether the drawdown rate is one the fund can sustain to age 100, what you pay in charges compared with other providers, and how your withdrawals are taxed alongside the State Pension and any other income. We also look at who inherits the ARF and the tax they would pay. Our pension review starts with the form on this page.

How much can I take as a lump sum?

Up to 25% of the fund from a PRSA or personal pension. In a company scheme you can usually choose 25% of the fund or an amount based on salary and service, up to 1.5 times final salary with at least 20 years' service. Lower amounts apply if you retire early, have less than 20 years' service or hold benefits from a previous scheme.

How is the lump sum taxed?

The first €200,000 is tax free. The next €300,000 is taxed at the standard rate of 20%, and anything above €500,000 is taxed as income at your marginal rate. The €200,000 is a lifetime limit covering every retirement lump sum you have taken since 7 December 2005.

How much do I have to take from my ARF each year?

Nothing has to be withdrawn, but Revenue taxes a minimum each year as if it had been. It is 4% of the value of your ARFs and vested PRSAs on 30 November once you are 60 or over for the whole year, 5% once you are 70 or over for the whole year, and 6% where the total is more than €2 million. Withdrawing at least that amount means the tax is paid on money you have in hand.

Can I move my ARF to another provider?

Yes. A transfer from one ARF to another in your name is not treated as a withdrawal, so the move itself is not taxed. We compare charges, funds and service across Irish Life, Zurich, Aviva, New Ireland, Standard Life and Royal London, check any cost of leaving your current provider, and handle the transfer.

Can I change my mind after buying an annuity?

Not after the short cancellation period in the policy. An annuity cannot be cashed in, and the options you choose, such as a spouse's pension or yearly increases, cannot be changed later. The reverse is possible: an ARF can be used to buy an annuity at any time, so you can start with an ARF and secure part of your income later in retirement.

What happens to my ARF when I die?

It can pass to your spouse's or civil partner's own ARF with no income tax and no inheritance tax. A child under 21 pays no income tax on it, though inheritance tax may apply. A child aged 21 or over pays income tax at 30% and no inheritance tax. Anyone else pays income tax and inheritance tax. An annuity stops on your death unless you chose a spouse's pension or a guaranteed period. Our estate planning page has more on passing wealth on.

What happened to the AMRF?

It was abolished. Before 2022, anyone under 75 without a guaranteed pension income of €12,700 a year had to place up to €63,500 in an Approved Minimum Retirement Fund or buy an annuity before using an ARF. Finance Act 2021 removed that requirement, and every existing AMRF became an ARF on 1 January 2022. An old AMRF is now an ARF and can be reviewed like one.

Will my private pension reduce my State Pension?

No. The State Pension (Contributory) is not means tested, so your ARF, annuity or lump sum does not reduce it. It is paid from 66 at a maximum personal rate of €299.30 a week in 2026, rising to €309.30 from January 2027. It is taxable, so we include it when we work out the tax on your pension income. If you were born on or after 1 January 1958, you can start it at any date up to 70 for a higher rate.

Sources

Checked 9 October 2026.

Warnings

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

Warning: If you invest in this product you may lose some or all of the money you invest.

Warning: Past performance is not a reliable guide to future performance.

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

See your retirement income in euro

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