Retirement options

When planning retirement, there are a number of options available to you, depending on your circumstances and the type of pension plan you have.

  • a retirement lump sum
  • an annuity
  • options for reinvesting your pension - Approved Retirement Fund (ARF)/Approved Minimum Retirement Fund(AMRF)
  • taxable cash

Retirement lump sum

You can take part of your pension fund as a retirement lump sum. You may be able to take some or all of this retirement lump sum tax free.

Most people now have the option to take 25% of the fund as a retirement lump sum.

The balance of the fund can then be used for one or more of the following:

  • Buy a pension for life
  • Invest in an Approved Retirement Fund (ARF) or Approved Minimum Retirement Fund (AMRF)
  • Take as a taxable cash sum

If you have a company pension you also have the option to take a retirement lump sum of up to one-and-a-half times your final salary, depending on the length of time you have actually been employed. The balance of your pension must be used to buy a pension for life.

However your Additional Voluntary Contribution (AVC) fund can be used for one or more of the following:

  • Buy a pension for life
  • Invest in an Approved Retirement Fund (ARF) or Approved Minimum Retirement Fund (AMRF)
  • Take as a taxable cash sum

You may be able to take some or all of your retirement lump sum without paying any tax. The maximum tax free amount you can receive is €200,000. Retirement lump sums between €200,000 and €500,000 will be subject to standard rate income tax.

Any retirement lump sums greater than €500,000 will be taxed at your marginal rate as income, the Universal Social Charge, PRSI (if applicable) and any other charges or levies (‘’tax’’) will also be taken.

Both the €200,000 and €500,000 limits include all retirement lump sums you have received since 7th December 2005.

Buy an Annuity, a pension income for life

An annuity is what many people commonly refer to as a pension. The most common option when retiring is to use your accumulated pension fund to buy a retirement annuity from an insurance company. This provides an income for the rest of your life.

The amount of income you receive will be based on, among other things, your life expectancy at retirement - so will vary by retirement age and gender - and the size of your retirement fund.

Payments from your annuity are treated as income so you will have to pay income tax on it and any other taxes due at that time.

Reinvesting your pension

With certain types of pension plans you may be able to reinvest some or all of your pension fund in an approved retirement fund (ARF) and withdraw money as you want, depending on certain restrictions. All withdrawals are treated as income so you will have to pay income tax on them and any other taxes due at that time.

Taxable cash sum

Depending on the type of plan you have, you may be able to take the rest of your fund, after the retirement lump sum, in one go. You will need to pay income tax on this.