Differences between Vested PRSAs and ARFs/AMRFs

When PRSAs were created, the legislation around them through up some little quirks that practioners discovered when they got into the weeds and read through the actual legislation. One of those quirks lead to the creation of the Vested PRSA. That is, at retirement age, you can take 25% as a tax free lump sum and leave the remaining 75% in the PRSA. You do not have to mature it until you reach age 75, when it must be matured or you will not be able to access it at all.

As the Vested PRSA just carries on as normal, there is no separate AMRF and ARF policies in place. It’s just one pot of money. But that does not mean unlimited access. The first €63,500 of the Vested PRSA is “ring fenced” in almost the same manner as an AMRF.

4% access to AMRF

Since 2015, you are allowed to make one annual withdrawal of up to 4% of the value of your AMRF. The value of your AMRF is irrelevant; it may have grown or fallen in value.

However, under the Vested PRSA, the first €63,500 is ring fenced and you cannot make any withdrawals from it. You can only access any value over that amount. Should you have a Vested PRSA for less than that value or if your existing Vested PRSA falls beneath that value, you cannot access the policy at all…unless you convert it to an AMRF, where you can access 4% per annum.

Imputed Distribution

We have seen already, that the first €63,500 is ring fenced and can’t be touched. But what is this amount grows in value? Well, the whole amount over €63,500 is subject to imputed distribution. This is best explained through an example.

Vested PRSA

  • Value – €127,000
  • 5% growth – €6,350
  • Total value – €133,350
  • Ring fenced – €63,500
  • Subject to imputed distribution – €69,850
  • Imputed distribution amount – €2,794
  • AMRF & ARF
  • Value – €127,000 – Split €63,500 into an AMRF & €63,500 into an ARF
  • 5% growth – €6,350
  • Total value – €133,350 – €66,675 in AMRF & €66,675 in ARF
  • Ring fenced – total AMRF value €66,675
  • Subject to imputed distribution – ARF value €66,675
  • Imputed distribution amount – €2,667

If you are happy not to access your AMRF and let it accumulate tax free without being subjected to imputed distribution, you are better to have the money in an AMRF, where it can accumulate tax free. Under the Vested PRSA option, any growth is subject to imputed distribution.

If you have any questions, send me an email to steven@bluewaterfp.ie