What is a Self Administered Approved Retirement Fund (ARF)?
The Praxis Plan is a Self Administered Approved Retirement Fund (ARF) and a Self Administered Approved Minimum Retirement Fund (AMRF).
What is an Approved Retirement Fund? (AMRF)
An ARF is a special investment fund which can give flexibility in terms of how you use your retirement fund. With an ARF you re-invest your retirement fund and take the money out as you need it. The Praxis Plan allows you to take control over where these funds are invested. An ARF is provided by a Qualifying Fund Manager (QFM) such as Harvest Financial Services Limited (HFS).
What is an Self Administered Approved Minimum Retirement Fund AMRF?
In order to establish an ARF you must have a guaranteed pension income for life of €12,700 per year (from pension sources other than your ARF investment). If you do not, you must invest €63,500 of your pension fund into an AMRF until age 75 or buy an annuity with that amount. Once you have put this money in an AMRF or an annuity you can invest the balance into an ARF. With effect from the 1st of January 2015 AMRF holders have the option of withdrawing up to 4% per annum of the value of their AMRF at date of drawdown. Appropriate statutory deductions (PAYE, USC and PRSI) will apply to any withdrawal. There is no obligation on AMRF holders to take this withdrawal.
What are the benefits an Approved Retirement Fund (ARF/AMRF) ?
The Praxis Plan provides a variety of benefits to you in retirement:
- you have access to a wide variety of investment options and providers;
- you can invest your funds in investments that fit your risk appetite;
- your investments grow free of both income tax and capital gains tax;
- you choose when to withdraw funds from your ARF and how much you take*; and
- on death, your Praxis Plan can pass to your estate.
*How do I take income from an Approved Retirement Fund?
You are required by the Revenue Commissioners to take a minimum distribution from your ARF annually once you are over age 60 for a whole tax year. This can be paid monthly, quarterly or annually. You can also make withdrawals from your ARF as needed, subject to statutory deductions. Appropriate statutory deductions are deducted on withdrawals from your ARF by HFS as the QFM.
With effect from the 1st of January 2015 the minimum distributions from the Praxis Plan once you are over age 60 for a whole tax year are as follows:
- 4% if you are not aged 70 years or over for the whole of the tax year and the value of your ARF is less than €2,000,000;
- 5% if you are aged 70 years or over for the whole of the tax year and the value of your ARF is less than €2,000,000; and
- 6% if the value of your ARF exceeds €2,000,000.
If you do not take a distribution in any given tax year there will be a tax bill due from your ARF. This is remitted in February of the following year for the imputed tax due on 4% / 5% / 6% of your ARF and based on the value as at the preceding 30th of November. There would be no income receivable on this amount, but the QFM will deduct and remit appropriate statutory deductions due. As your ARF will have already paid tax on this amount and you never received any income a double taxation situation arises. It is therefore advisable for you, where possible, to take an actual distribution of at least the minimum required amount annually.
What happens to the Approved Retirement Fund (ARF) when I die?
On your death your Praxis Plan can be transferred to your spouse / civil partner tax-free who can continue to manage the Praxis Plan investments and make withdrawals from the Praxis Plan. Alternatively your Praxis Plan can be left to your children or other persons subject to income and / or inheritance tax.
What can I invest my Approved Retirement Fund in?
The investment choice is ultimately down to you, subject to certain Revenue rules. Some of the assets HFS clients invest in are:
- property (ungeared);
- personalised equity portfolios;
- corporate and government bonds;
- international funds;
- private equity; and
Why set up an Approved Retirement Fund?
HFS has been providing self administered retirement solutions to clients since 1993. HFS administers approximately €900 million in retirement funds and personal funds on behalf of our clients (figure correct as at June 2015). As an independent company, HFS is uniquely positioned to provide you with the broadest possible range of investment options.
Whether you want the investment flexibility and / or the cost transparency of the Praxis Plan, HFS will work with you to maximize the benefits of the Praxis Plan to secure your income in retirement. For more information, or to arrange a meeting to discuss the suitability of the Praxis Plan for your retirement provision needs, please contact us on 01 2375500 or email email@example.com.