Retiring in Ireland: What Happens to Your Pension?

When you retire in Ireland, you can typically take up to 25% of your pension fund as a tax-free lump sum, subject to lifetime limits. This amount is paid directly to your bank account and can be used however you wish — whether to pay off debt, help family, or enjoy your retirement.

With the remaining balance, you’ll need to choose how to draw an income. Your main options are an Approved Retirement Fund (ARF) or an annuity. An ARF keeps your money invested and allows flexible withdrawals, offering growth potential and estate planning benefits — but with investment risk. An annuity provides a guaranteed income for life, offering security but less flexibility. The right choice depends on your personal goals, lifestyle, and attitude to risk.

Your Tax-Free Lump Sum at Retirement: Should You Take the Full 25%?

When you retire in Ireland, one of the first decisions you’ll make is how much of your pension fund to take as a tax-free lump sum. This is a major financial moment — and it pays to understand your options.

How Much Can You Take?

You can typically take up to 25% of your pension fund as a tax-free lump sum, subject to lifetime limits:

  • The first €200,000 you take from pensions is completely tax-free

  • The next €300,000 is taxed at 20%

  • Any lump sum above €500,000 is taxed at your marginal rate (up to 40% + USC/PRSI)

A Good Rule of Thumb?

Take what you need, not just what you can.

We can help you decide what makes the most sense for your life stage, lifestyle goals, and income needs.

Approved Retirement Fund (ARF)

Your money stays invested — meaning growth potential, but also market ups and downs.

Mandatory annual withdrawals begin at age 61 and increase at age 71.

Estate planning advantage: Remaining funds can be left to your family or beneficiaries.

Bomb-out risk: If investment returns are poor or withdrawals are too high, the fund may run out during your lifetime.

Best for: Those seeking flexibility and comfortable managing investments.

Annuity

Provides guaranteed income for life, regardless of how long you live.

No investment risk — your income doesn’t depend on markets.

Risks include - passing away before the full benefit is received, provider insolvency.

Optional additions: Spouse’s pension (reversionary benefit), Guaranteed payment periods (e.g. 10 years), Index-linking to keep pace with inflation

Health matters: Poor health may result in a higher annuity income.

Which Option is Right for You – ARF or Annuity?

Choosing between an ARF and an annuity depends on your goals, risk tolerance, and financial circumstances. If you value flexibility and are comfortable with market exposure, an ARF may suit you. If you prefer guaranteed income with no market risk, an annuity might be the better fit.

Speak to one of our advisors to explore what’s right for your situation and how to structure your retirement income efficiently.