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The AMRF is no more! How will this impact me?

The Finance Bill 2021 introduces changes to Pension rules

 

The Finance Bill 2021 was signed into law in December 2021. It introduced a number of significant changes to pension rules, including the removal of the AMRF (Approved Minimum Retirement Fund). These changes were based on some of the recommendations detailed in the report produced by the Inter-Departmental Pensions Reform & Taxation Group (IDPRTG).

 

There are both positive and negative potential implications to come from these changes for clients who are retiring or who have already retired, as will be discussed below…

In general, however, we welcome these changes as the associated restrictions on AMRFs were regarded by many as no longer fit for purpose.

 

What was an AMRF?

 

Previously, before an individual could take out an ARF (Approved Retirement Fund), up to €63,500 of their fund would have been needed to purchase an Approved Minimum Retirement Fund or AMRF. At age 75 the AMRF would then be converted into an ARF. If the person had a guaranteed income of over €12,700 per annum including the state pension then an AMRF was not required. 

 

The purpose of the AMRF was to help pensioners secure their income throughout retirement by protecting them from drawing too much income from their pension funds, if they had a guaranteed pension income less than €12,700 a year.

 

What has changed?

 

1. The AMRF requirement will no longer apply at retirement  if you are looking to avail of the Approved Retirement Fund (ARF) option from Occupational Pension Schemes, Personal Pensions (Retirement Annuity Contracts), Personal Retirement Savings Accounts (PRSA’s), and Personal Retirement Bonds.

 

2. Legislative rules and conditions applying to AMRFs were repealed with effect from 1 January 2022 – and Fund Managers cannot accept any assets into an AMRF after 1 January 2022.

 

The AMRF requirement will longer apply at Retirement if you are looking to avail of the Appr

At retirement, you will no longer need to meet the following requirements:

 

  1. Have a guaranteed pension income of €12,700 a year.
  2. Invest €63,500 into an AMRF.
  3. Keep €63,500 as a restricted fund in a vested PRSA.
  4. Use €63,500 to purchase an annuity (pension income for life

 

Additional changes made, as follows:

 

  1. The death in service options available from company pension plans have been expanded to allow for the deceased’s spouse to invest in an ARF as an alternative to a spouse’s annuity.
  2. The restriction which prevented those in company pensions with their employer for more than 15 years from transferring to a PRSA has been removed. Other requirements still apply when transferring to a PRSA.

 

I have an AMRF, how will this impact me?

 

The changes will impact many clients who held AMRF policies – for example those who, until now, did not satisfy the guaranteed income requirement (€12,700) and/or those who due to their age (under 66) meant that they were not yet in receipt of state pensions.

 

It will also impact, in some cases, those who had reached state pension age but did not receive the maximum rate of state pension and meet the threshold of €12,700 – for example, due to gaps in their Pay Related Social Insurance (PRSI) record.

 

On 1 January 2022 your existing AMRF plan automatically became an ARF, and the legislative rules applying to ARFs now apply to these former AMRFs.

 

I have a vested PRSA restricted fund, how will this impact me?

 

What is a vested PRSA?

It is a PRSA where the Retirement Lump Sum has been paid out and the residual fund remains in the PRSA rather than transferred to an AMRF. 

 

The above changes to AMRFs also apply to vested PRSAs:

The restricted fund requirement is now removed from your vested PRSA.  This change will give you greater flexibility regarding your withdrawal options.

 

Options at Retirement

 

The requirement to purchase an AMRF for those without a guaranteed income of €12,700 has now been removed.

As a result, should you choose the “ARF Option” for your residual fund, you can now allocate the entire residual fund (after the Retirement Lump Sum is paid) to your ARF – or to a number of separate ARF policies – or to a combination of ARF and/or Annuity.

You may also take the residual fund as a once-off taxable cash payment.

 

Withdrawals from ARFs:

Withdrawals from ARFs

 

Prior to 1 January 2022, the maximum withdrawal that was allowed from an AMRF was 4% per annum. Given the recent changes, if you previously held an AMRF policy, you may be tempted to take large withdrawals or fully encash the policy.

 

This may be essential in cases of illness or financial hardship, but be advised that significant withdrawals or full encashments may result in early surrender penalties and will likely be taxed at your marginal rate of income tax, USC, and PRSI (where applicable).

 

When a full encashment is made in any given year, this could result in a higher tax on those funds when compared with taxation where the funds are withdrawn on a gradual or phased basis over a number of years.

 

Positives:

 

  1. The removal of AMRFs now allow for simplified post retirement options.
  2. This will give more flexibility in accessing your pension fund, and your withdrawal options.

 

A Caution:

 

  1. The requirement to draw an annual income from your entire pension may may have implications on the expected longevity of the fund in retirement. Here, consideration should be given for the investment decisions made in relation to your income requirements.

 

Impartial Financial Advice

 

Contact us for Financial Advice

You may have additional options and possibilities as a result of the changeover from AMRF to ARF.

 

For advice in understanding your available options, speak to our Financial Advisors who will be able to guide you appropriately.

 

Need some assistance?

Fill out your details and enquiry below, and one of our Qualified Financial Advisors will get back to you shortly.

Is it worth having a Pension?

 

We’ve often heard expressions along the lines of: “why save money for later” or “investing in pensions is gambling”. While these represent the thinking of a certain portion of the population it is important to understand that by putting a away a certain amount each month you can make your money work smarter, faster and go much further allowing you to live the life you want in retirement. In the following, we point out four reasons why you SHOULD bother with a pension…

 

1. Tax Relief on Pension Contributions

 

The state doesn’t want to be responsible for you when you’re going on month long cruises around the Mediterranean in retirement, therefore they allow any payments towards your pension plan to offset your income tax bill. The maximum percentage of your income you can claim relief on, depends upon your age (Click here for an illustration). And the contributions you make benefit from the THREE tax breaks:

 

  1. You can claim tax relief on contributions at your higher tax rate (20 or 40%).
  2. No tax on investments growth within you pension fund.
  3. When you want to retire you can then take 25% of your final sum tax free & up to 4% per annum thereafter to fund your income post retirement.

 

The closer you are to retirement age, the greater the percentage of your income you can contribute. If managed correctly you can fund, receive a retirement income and earn investment growth all tax free. This underpins the importance of receiving good advice when managing your pension!

 

2. Choose When To Retire!

 

Currently the qualifying age for the Irish state pension is 66 years old. This will inevitably increase with time due to the ageing Irish population & increases in longevity. If you do wish to retire earlier or would maybe just like to have the option to do so in the future, funding a private pension is the way forward. Maybe you would like to take a step back from work in your early sixties but keep your toes in your work for much longer. By funding a private pension and sticking to the plan, this can become a reality.

 

 

3. You need Income in Retirement

 

People often forget that your income is your most important asset! Pre-retirement, a decent portion of your disposable income (money left over each month after your fixed expenses) will likely be going towards the things you enjoy doing on the weekend, or a going for a quick trip across the pond every now and then. Then all of a sudden you realize you have more wrinkles than you ever remember having, you have left your employer for good, retirement has snuck up on you without having planned how and where you will receive the same level of income that has supported you throughout the many years. To plan for retirement you will need to know where your income will come from.

 

€248.30 per week or €12,911.60 per year is what the Irish government is giving to retirees in 2021 to do with as they please. If you were used to a much higher income & would like to still go out to your favourite fancy restaurant at the weekends (Covid Depending), you will need to have another source of retirement income. For most people, a private pension plan is the way how. Revenue limits on your pension income allows for up to 4% per year tax free to be drawn down which will help supplement your state pension.

This handy Pension Calculator will show you how much you need to start saving NOW to receive your preferred income in retirement.

 

Did someone say Retirement Plan? A good place to start planning is to look at your current monthly income (after tax) and ask yourself what ideal amount you would like to receive on a monthly basis in retirement to maintain your preferred lifestyle.

 

This handy Pension Calculator will show you how much you need to start saving NOW to receive your preferred income in retirement. Next, contact your Financial Advisor (right here if you don’t have one), simply discuss your current financial situation, and a solution that best suits your retirement goals and he or she will regularly check in with you to ensure that you are maintaining them.

 

4. We’re all living longer – Irish people especially!

 

Nowadays, people are leading more active lives in retirement. Living longer certainly sounds appealing as it gives us more time to accomplish our goals in life like visiting the places we’ve always wanted to and enjoying our everyday hobbies. Although positive, this also brings with it the challenge of having enough financial resources to see it through.

 

According to the 2019 Key Health trends published by the department of Health in Ireland, over the past decade we have added 3 months per year to our life expectancy with the overall mortality rate having reduce by 10.5% since 2009. This shoots Ireland above the EU average as living longer than our European neighbors. Life expectancy on average will now see men living to 78 and women to age 83. Long term care is an expensive business for the elderly, and so by planning now for sufficient income in retirement will ensure that you don’t have to be a financial burden on your family.

 

So where to from here?

Which pension option is best suited for me?

 

The earlier you start contributing to your Pension, the better off you will be in retirement! Most people find that paying into a pension is not the highest priority. And that makes total sense given that more important financial obligations come first such as mortgage or rent bills, insurance premiums, other loans to pay off, and not to mentioned putting food on the table at the end of the day.

 

However, after these mandatory expenses and if you have a few quid left over each month, consider regularly putting some away into your own private pension. You will thank yourself later in life! 

 

The best option for you depends on your personal circumstances.

If you need guidance on how prepare for the retirement YOU want, the best place to start is to seek advice from a Qualified Financial Advisor.

 

      Drop us a call here   

 

 

Need some assistance?

Fill out your details and enquiry below, and one of our Qualified Financial Advisors will get back to you shortly.

How to Transfer my UK Pension to Ireland

 

Following Brexit

As of January 2020, the United Kingdom (UK) had officially left the European Union (EU). With the provision of the withdrawal agreement came the transition period, which will run up until December 31st, 2020 allowing UK citizens and business to remain as part of the EU’s rules, regulations and trading arrangements.
 
This will give businesses on both sides time to adjust for upcoming changes. The transition period will end on the 1st of January 2020, changing the conditions of policy and trade outcomes and will highly depend on negotiations held between the UK and EU during the transition period.
 
Despite of the many uncertainties involving Brexit, UK Pensions seems to be a more stable matter. The governments of Ireland and Britain have guaranteed the continued payment of state pensions, child benefit and other social welfare payments in the event of the UK crashing out of the EU without a deal.

UK State Pensions

UK Pension Claimants

Ireland leads the number of UK pension Claimants. Source BBC – DWP Figures for August 2019

 

As demonstrated by the graph above, Ireland ranks 1st on European Countries pension claims. With the possibility of a no deal scenario, it is natural that many financial concerns arise with regards to UK pensions.
 
Essentially, this article will target the impact Brexit will have on UK pensioners living in Ireland. Would their Pensions enjoy the same entitlements? What is the right way to transfer UK’s pensions to Ireland?


Uprating

If you live in the UK, your state pension is uprated every year in line with the triple lock, which means it rises by whichever is highest of average earnings, inflation or 2.5%.
 
As regards to uprating, Ireland and Britain Governments agreed that you will continue to get your UK State Pension uprated if you move to Ireland and you are a UK or Irish national, even after the Withdrawal Agreement deadline.

You will be able to claim and continue to receive UK benefits in Ireland if you are an UK or Irish national, as long as you continue to meet the qualifying conditions.

 

State Pension Eligibility

UK State Pension eligibility could also incur some material change. When the UK was part of the EU, the process of claiming retirement for people that worked in different European countries was simple and done by a single claim.
 
For instance, if someone had worked for 10 years in the UK, other than having worked in different EU countries, when they were eligible to retire, they could apply for their state pension in the last country where they lived or worked, and the single claim would then be coordinated by that country’s authorities.
 
You are currently also entitled use period work in other EU countries to count towards your 10 year minimum threshold to claim for a UK pension (it is worth noting that you would only be paid based on the contributions made when you were working in the UK).
 
The withdrawal agreement keeps that coordination going for those living in Europe until the end of 2020, however it will depend on negotiations on the future relationship between the EU and the UK.


UK Pension Transfer

 

How can I transfer my UK Pension to Ireland?

 

Most Irish residents under the age of 70 are also eligible to transfer their pensions, with a few restrictions.

 

If you have worked in the UK some time during your career you would have probably built up a Pension pot. If you are planning to move back to Ireland, or if you have already done so, you can move/transfer your UK Pension to Ireland by way of a Qualified Recognised Overseas Pension Scheme (QROPS) Buy Out Bond. This would give you more control over your investment options, both now and when you retire.

 
That is the ideal option in most cases, as it is more convenient to have your pension in your country and in your exchange rate. In addition, having your pension abroad can increase bureaucracy in future operations such as Inheritance Planning.

 

*If the scheme to which you are considering transferring your pension savings is not a QROPS, your UK pension scheme may refuse to make the transfer, or you may have to pay at least 40% tax on the transfer.

 

QROPS

 

A Qualifying Recognized Overseas Pension Scheme (QROPS) is a pension scheme that is allowed to receive a transfer of UK pension benefits free of tax.
 
QROPS offers a retirement opportunity whether you are an Irish national that had paid into a pension in the UK and is now planning to transfer your pension to Ireland, or a UK national concerned about the effects of Brexit on your pension and want to safeguard your personal retirement savings against the increasingly restrictive UK pensions regime.
 
A QROPS offers flexibility and significant taxation and investment advantages, allowing UK pension holders to still be able to invest in them.

 

What are the benefits?

 

  1. Control Greater control over your pension investment.
  2. Tax – A QROPS can accept pension transfers from the UK without potentially triggering a tax charge.
  3. Convenience It is easier if you are planning to retire back home in Ireland. If you leave your pension benefits in the UK, you will have to submit an annual tax return in Ireland in retirement declaring your income from the UK. Transferring your pension to Ireland would also allow you to work with a Financial Advisor familiar with the Irish market.
  4. Inheritance Planning If the beneficiaries of your Will or your dependents are not living in the UK, leaving your pension there may be more complicated to deal with in the event of your death, making more sense to transfer your pension to Ireland.
  5. Standard Fund Threshold Any pension savings you transfer to a QROPS in Ireland does not count towards the €2 million Standard Fund Threshold (which is the maximum pension amount you can save for in Ireland without heavy tax charges). The SFT only takes into consideration pension savings in relation to Irish earnings.

 

How does QROPS affect my Tax Free Lump Sum?

 

  1. The tax free lump sum you claim from your QROPS forms part of your lifetime limit in Ireland.
  2. It will be included in your €200,000 tax free lump sum limit (and optional €300,000 taxable lump sum taxed at the standard rate of tax).
  3. If your total pension fund at retirement exceeds €800,000 (between your UK & Irish pensions), the excess in the lump sum over €200,000 would be taxed in Ireland at 20%, where it could be tax free in the UK.

 

Considerations before transferring your UK Pension to Ireland

 

Tax charges on Transfer:

First off, make sure to transfer your pension to a scheme that’s been registered with HMRC as a QROPS. Otherwise, it could result in UK tax charges of up to 55% of the amount transferred.

 

Pension Age:

The minimum retirement age on a QROPS is 55. You can only access your benefits before age 55 on the grounds of ill health.

 

Tax Residency:

If you have been a resident in the UK anytime within the last 5/10 UK tax years, you may be liable to UK tax on your QROPS at retirement.

 

Accessing your Pension:

For all transfers received into a QROPS, benefits can be paid if you;

  1. Are age 55 and over and,
  2. Have not been a UK tax resident for at least 10 UK tax years.

 

Overseas Transfer Charge:

There is a 25% overseas transfer charge on a QROPS unless the transfer is:

  1. To your employers occupational pension scheme, or
  2. To your country of residence, or
  3. Within the European Economic Area

 

Pension Limits:

There are limits in both the UK and Ireland as to how much you can save into a pension, outside of which you maybe liable to tax. In the UK this is referred to as the Lifetime Allowance. In Ireland, it is referred to as the Standard Fund Threshold.

 

It would be worth assessing the value of your pension with the Lifetime Allowance in mind.

 

Options at Retirement:

You can check with your UK provider on what type of pension you have and how you can access your money at retirement from that scheme.

 

 

It is safe to say that despite the few uncertainties regarding your UK Pension, there are already some options in place for Irish residents to avoid losing their well-earned benefits and, while it is a more complex process, we can help take the burden off your shoulders.

 

Smart Pension Advisors

The Transfer Process

Our Financial Advisors can facilitate QROPS transfers to bring your UK pension benefits back to Ireland (with an Irish registered life company) and into your own name. 

 

  • Step 1:

  • Talk with our Financial Advisors to discuss your options and to make sure it is the right decision for you. We will  will complete the relevant paperwork with you for the QROPS Buy Out Bond, and ensure there will not be any UK tax implications.
  • Step 2:

  • Request the transfer options form from your UK provider that includes the option to transfer overseas.
  • Step 3:

  • These transfer options need to be signed and processed by the trustees of the UK scheme.
  • Step 4:

  • The agreed upon Irish Pension provider will receive the transfer from the UK, convert it to Euro for you, and ensure your QROPS Buy Out Bond is set up. The Pension will now be in your name and in your control.

 

 

 

I want to transfer my UK pension to Ireland

What’s the next step?

Fill out your details and enquiry below, and one of our Qualified Financial Advisors will get back to you shortly.

 

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