Is the AMRF dead…or dying at least?

As a financial advisor, the AMRF requirement is a pain. When people ask their options in retirement, I explain the annuity and the ARF options (no one goes for taxable cash). But then I have to say, if you do not have a guaranteed pension income of €12,700 per annum, you must put €63,500 in a product called an AMRF until you are 75 and you can only take out 4% each year. People look at me confused because it doesn’t make any sense to them. It doesn’t make any sense to me either, but they are the rules as set down by Charlie McCreevy when he introduced the ARF.

Almost there

Over the years, the State Pension has been creeping up to that magical figure of €12,700. With the €5 per week increase announced in last years Budget, it now stands at €12,651.60 a year, a mere €48.40 short of the required amount. But you might as well be €10,000 short as €48.40 short, if you didn’t meet the €12,700 amount it was irrelevant how short you were.

Revenue lends a hand

The Revenue have now announced that the Christmas bonus that is payable to pensioners can now count towards the €12,700. This is 85% of the weekly payment, so someone in receipt of the maximum €243.30, will get an additional €206.81 at Christmas putting them way over the required amount.

This is great news for the thousands retirees who have small pension pots and found most or all of their pension in retirement being put into an AMRF with only access to 4% of the fund.

With an income tax exemption of €18,000 (€36,000 for a married couple over 65), it means that the AMRF can be emptied out pretty quickly with only a small amount of USC to pay.

It has been pointed out however, that the Christmas bonus is not a guaranteed payment and it has been stopped before. I can’t imagine the Revenue rolling back the AMRF requirement if the government announce they won’t be paying the bonus in any given year.

What about the rest of us?

While the Revenue announcement has effectively reduced the term of the AMRF  from age 75 to when you receive your old age pension, it doesn’t do anything for the rest of us. The State pension being paid from age 68 for anyone born from 1961 onwards. Wouldn’t it be a great idea if these people had access to all of their pensions funds so they could use it to bridge the gap between retiring at age 65 and when they receive their State pension. This is especially relevant to those who have small pension pots.

Studies have shown that we spend less as we get older, so why not give retirees access to all of their pension money when they have the most need for money? If you are prudent enough to save for your retirement, you will be prudent enough not to blow the money in one go. Pensioners certainly do not need the State to save them from themselves.

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