ARF income, the imputed minimum, and how long it lasts.
Year 1 net income
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Year 1 gross drawdown
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Year 1 tax + USC
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Fund lasts
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What an ARF actually is
An Approved Retirement Fund is the pot most people move into at retirement instead of buying an annuity. You keep your pension money invested and draw an income from it, with the upside that whatever is left passes to your estate, and the risk that you can run it down if you draw too hard or markets fall. This calculator models the income side of that decision: what you take in year one, what Revenue takes in tax, and roughly how long the fund survives at your chosen drawdown and growth rate.
The key rule that catches retirees off guard is the imputed distribution. Revenue treats your ARF as paying out a minimum percentage of its value each year, and taxes you on that minimum whether or not you actually withdraw it. The rate is 4 percent of the fund value from age 60 to 69 and 5 percent from 70 onward, climbing to 6 percent for funds above €2 million, which this tool does not separately model. So even a retiree who wants to leave the money untouched cannot avoid the tax on the deemed minimum.
Drawdown is taxed like a salary
Money coming out of an ARF is not tax-free. It is treated as income and runs through the same machinery as pay: income tax at 20 percent up to your standard rate band, 40 percent above it, then USC on top. The tool applies the single personal credit and the PAYE credit against the income tax, which is the common position for a retiree with no other large income. If you also draw the State Pension or have rental income, your real rate will be higher because those use up your band and credits first.
Drawing 4 percent on a €400,000 fund at 65
Consider a €400,000 ARF, owner aged 65, drawing 4 percent a year with the fund growing 4 percent a year, the values the calculator starts with. At 65 the imputed minimum is 4 percent, so the chosen 4 percent already meets it. The gross drawdown is €16,000. Run that through the single credits and the income tax falls to zero, because €16,000 sits well inside the standard band and the €4,000 of credits wipes out the 20 percent charge on it. USC is the only deduction, at roughly €140. The net income is about €15,860. And because the 4 percent growth matches the 4 percent draw, the fund barely shrinks and lasts beyond the 60 year horizon the tool projects.
| Line | Amount |
|---|---|
| Fund value | €400,000 |
| Gross drawdown at 4 percent | €16,000 |
| Income tax after single credits | €0 |
| USC | about €140 |
| Net income, year one | about €15,860 |
When the fund runs dry, and who this suits
The longevity figure is where the tool earns its keep. Push the drawdown above the growth rate and the balance starts falling every year, and the gap compounds. A 6 percent draw against 3 percent growth on the same fund empties it within a couple of decades, which for someone retiring at 65 is a real danger. The standard rule of thumb among advisers is to keep the long-term drawdown at or below the expected real return, and to treat the imputed 4 or 5 percent as a floor on what you are taxed, not a target for what you spend.
This is built for someone weighing up an ARF against an annuity, or an ARF holder sense-checking whether their income plan is sustainable. A common error is to forget that the imputed distribution forces a taxable event even in a year you take nothing, so parking the whole pot to grow untouched is not actually possible once you are past 60. Another is to model a flat growth rate and treat the result as a promise. Markets do not deliver a smooth 4 percent, and a run of poor early years, what advisers call sequence risk, can shorten a fund far faster than the average return suggests.
Can I take less than the imputed minimum?
You can physically withdraw less, but for tax the imputed minimum still applies. Revenue treats the 4 or 5 percent as distributed and taxes you on it regardless, so there is rarely any point drawing below it, you would pay the tax without getting the cash in hand. The tool reflects this by using the greater of your chosen percentage and the imputed rate.
What happens to the ARF when I die?
An ARF does not vanish. The balance passes to your estate. Where it goes to a surviving spouse or civil partner it can usually transfer into an ARF in their name with no immediate tax. Passing to a child aged 21 or over, it is taxed at a fixed 30 percent income tax rate rather than at the child’s marginal rate, which is one of the features that makes the ARF attractive for leaving money behind.