Recent changes to pension rules have improved the retirement choices available to members of defined benefit (DB) schemes. Previously members of defined benefit schemes had one option only after taking their retirement lump sum, receiving a pension income (annuity) in retirement. This was the case even if the member left the scheme and had taken a transfer out of the scheme to a retirement bond, as the benefits of the DB scheme became attached to the retirement bond.
Now Defined Benefit members who take a transfer value out of a DB scheme to a retirement bond may in addition to the annuity option:
· Take up to 25% the value of the retirement bond as a tax free lump sum (subject to revenue limits) and
· Transfer the remaining 75% of the fund to a ARF/AMRF (Approved Retirement Fund / Approved Minimum Retirement Fund)
The ARF/AMRF option may suit those who are concerned about the retention of the value of retirement benefits for passing on to next of kin. When there is no guaranteed period or spouses pension benefit, the annuity (pension) ceases with the death of the annuitant. However, in the case of the ARF/AMRF the capital value transfers to the estate of the deceased.
The Minister for Finance, Michael Noonan T.D. said:
“This change will be of particular benefit to those individuals with Buy-out Bonds whose Defined Benefit scheme may have been wound up and who had no choice but to accept a transfer to a Bond. I have asked the Revenue Commissioners to make any necessary administrative changes to give effect to this improvement which offers greater choice to holders of Buy-out Bonds.”
For more information on these changes and how they affect you please get in touch with Ark Finance. We are independent financial advisors with a wealth of market knowledge and would be happy to assist you in planning for your retirement.