New ways of working and retiring are being experienced.

We are all different.

At Nelson Life we appreciate that the attitudes and behavious of the senior members of our population is definitely different to that in the past.

The new 50+ is definitely healthier, and more active than ever – taking a much more proactive role in the financial decision making process at retirement.

Pension decision at retirement are complex – our first goal is to ensure you are aware of the options.

Annuity options versus ARF options.

This is never a straight forward decision and needs to be tested with lots of different scenarios – the risk of the ARF losing value and the risk of the ARF asset being exhausted is a real one – if the owner lives long enough.

Comparing the different options.

1. An Annuity is a contract with a life insurance company whereby they guarantee to pay you a regular pension income for the remainder of your lifetime in return for a fixed sum at outset.

The rate is fixed at the beginning with no option to alter once purchased.

On death, there will be no income paid to your estate or spouse unless a guaranteed period still applies or a dependent’s pension has been purchased.

2. An ARF is a personal retirement fund where you can keep your money invested after retirement.

You can withdraw money from the ARF regularly to give yourself an income (subject to minimum requirements) and, unlike an Annuity, any money remaining in the fund after death can be left to your estate or spouse.

Without appropriate planning and management, the fund in your ARF may run out depending on how much you withdraw each year and how your investment funds perform.

There are certain restrictions to investing in an ARF; these should be considered before any decision is taken. To invest in an ARF, you must:

  • have invested a specified amount in an Approved Minimum Retirement Fund (AMRF) or Annuity or in a combination thereof (currently €63,500), or
  • have a guaranteed lifetime income of at least the annual AMRF specified income amount (currently €12,700 p.a.), or
  • have reached 75 years of age. The minimum amount you are required to withdraw from an ARF is: – 4% from the year you turn 61; – 5% from the year you turn 71; or – 6% if your combined ARF & Vested PRSAs are valued at more than €2,000,000

The main difference between an ARF and an AMRF is that with an AMRF you have the right – but not the obligation – to take an income of up to 4% of your AMRF, each year.

An AMRF automatically becomes an ARF when you: – reach age 75; or – meet the minimum income requirement of €12,700


Annuity – This offers you a guaranteed income for the whole of your life.

ARF – No guaranteed income for life but you have the flexibility to choose the level of withdrawals you want to make (subject to revenue rules*).


Annuity – You cannot make any changes to your annual income once your annuity is purchased.

ARF – Flexibility to withdraw how much you wish to annually (subject to revenue rules*).

Growth potential

Annuity – None, your annuity income (rate) is fixed on the date of purchase with no potential for further growth. If you choose a fixed rate of escalation then your income payments will increase by that amount each year.

ARF – You might benefit from future growth if your fund is invested in suitable assets, though there is the risk that the value of your fund could also fall.

Risk of fund exhaustion

Annuity – None. You are locked into a fixed annuity rate which is guaranteed to pay out for the remainder of your life.

ARF – Without careful planning and management, the fund in an ARF could be depleted depending on the amount you withdraw each year and how your investments perform.

When death occurs

Annuity – Your income payments stop when you die and there will be no income paid to your estate or spouse unless a guaranteed period still applies or a dependant’s pension has purchased at outset.

ARF – Any money left in an ARF after you die may be left to your estate or spouse. *Minimum of 4%/5% depending on age and 6% when ARF fund greater than €2,000,000.

Special terms if have a medical condition

Annuity – may qualify for an “enhanced annuity”.

ARF- If condition is life threatening then need to consider ARF option and payment of residual value on your death to your beneficiaries.

Attached graphic

Please see attached graphic – €400,000 ARF investment, client aged 66, annuity rate 4.22% per annum (single life annuity)

We  have run TWO scenarios – both for an ARF valued at €400,000

  1. Income from the ARF is €16,000 per annum.
  2. Income from the ARF is €20,000 per annum.

If you purchase an annuity, the annuity rate is determined at outset – there is an option to get an improved “enhanced annuity rate “ if suffering from a particular medical condition.

However, underlying contract rate may be higher for older pension schemes – if there is an underlying protected annuity rate in the contract.

The longer you live, the greater the cumulative income you will receive.

On death, payments will cease unless a guaranteed period still applies or a dependant’s pension has been purchased – i.e. joint annuity, where % payable on death to survivor is 100% , 75% or 50% of the original annuity.

An ARF is different.

The fund value of your ARF will rise or fall with investment performance, and will reduce in line with the level of income chosen.

On death any money remaining in the fund can be left to your estate or spouse – potentially taxable.

If you have a financial planning or product question please contact us :

This article was written by Rory Nelson, founder of Nelson Life. Rory is celebrating 20 years in financial planning this year. Professional qualifications include; UCD Specialist Diploma in Wealth Management, Pension Trustee Practitioner PTP, UCD Professional Certificate in Stockbroking, QFA FLIA, Pensions Diploma, Mortgage Advice Diploma and has a degree in BA Accounting & Finance. He has regularly participated in national financial press.

Know more.    091 44 11 88 or


Nelson Life is regulated by the Central Bank of Ireland.

We are Trusted Financial Advisors and now have access to 19 product providers (we are NOT tied to one provider).

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

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

WARNING: You may lose some or all of the money you invest.

WARNING: These funds may be affected by changes in currency exchange rates.

WARNING: If you invest into this product you will not have access until you retire.

WARNING: The above content does not constitute investment advice, as it does not take into account the investment objectives, knowledge and experience of financial situation of any particular person. Prospective investors are advised to make their own assessment of the information contained herein and to obtain professional advice suitable to their own individual circumstances.

Warning: The information contained in this document is based on our understanding of current tax legislation and the current Revenue Commissioners interpretation thereof and is subject to change including retrospectively without notice. This is intended as a general guide only and is not a substitute for professional tax, legal and investment advice. 

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