Personal Pensions


Personal pensions or private pensions mean pensions that are organised individually by self-employed people or employed people who do not have an occupational pension scheme. Personal pensions are managed by a life assurance or investment company.

Unlike occupational pensions, personal pensions are generally not subject to the regulation of the Pensions Authority. Instead, personal pensions are subject to tax law and financial services legislation (including the general law on insurance).

Tax relief is available for contributions to personal pensions and the amount of the relief is age-related.


Most personal pensions policies are insurance policies. Unlike other insurance policies, the contributions attract tax relief if various conditions are met.

The traditional personal pension arrangement was that you invested your money - usually on an annual basis - with an insurance company. The premiums you paid were then invested by the insurance company in an investment fund. You could not remove your funds and invest them with another company. When you reached the age specified in the policy, you were obliged to use your accumulated funds to buy an annuity.

Since 1999, you are no longer obliged to buy an annuity and you also have considerable flexibility about moving between different funds.

Tax relief on contributions

You may get tax relief on contributions to approved personal pension arrangements.

If you’re a PAYE worker, this relief is generally applied at source by your employer. You can also apply for the relief online at Revenue’s myAccount service. If you’re self-employed, you can apply for tax relief on contributions by using Revenue’s Online Service (ROS).

This relief is more generous as you get older. However, you pay PRSI and the Universal Social Charge on your pension contributions.

Age Amount which qualifies for tax relief
Under 30 years 15% of net relevant earnings
30 to 39 years 20%
40 to 49 years 25%
50 to 54 years: 30%
55 to 59 years 35%
60 and over 40%

The maximum amount also applies to people in certain occupations and professions, irrespective of age where there is a limited earnings span. These occupations include professional athletes.

There is a limit on the earnings that may be taken into account. The limit is €115,000.

You no longer have to buy an annuity with the proceeds of your pension policy, however, you may do so if you wish. This option does not apply in general to occupational pensions, but it may apply to the Additional Voluntary Contributions (AVCs) paid by people in occupational pension schemes.

Limit on overall value of fund

The Finance Act 2006 introduced a limit on the value of an individual's pension fund which may attract tax relief and this may vary from year to year. This is called the Standard Fund Threshold. From 1 January 2014 the absolute value of the Standard Fund Threshold has been €2 million. If the fund is greater than the limit, then tax at 40% will be charged on the excess when it is drawn down from the fund.

Taxation of lump sum

When you retire, you can usually take part of your pension fund as a tax-free lump sum. The amount you can take depends on the type of pension plan you have and how much you have taken in tax-free lump sums from other pension plans

There is a limit of €200,000 on the amount of the tax-free retirement lump sum. Lump sum payments above that limit will be taxed as follows:

Lump sum taxation rates
Amount of lump sum Income tax rate
Up to €200,000 0%
€200,001 - €500,000 20%
Over €500,000 Taxpayer's marginal rate

Transfer between funds

You do not have to remain in the same pension fund. You may transfer funds accumulated with one insurer to another fund with another insurer. Of course, there may be costs involved in doing this.

When you retire, you may opt for the existing annuity arrangements or for the new arrangements. The new arrangements mean that the accumulated fund is your property. You must take your pension not later than your 75th birthday.

Options on retirement

On retirement, you may have the option of transferring all or some of your retirement fund into an annuity or other approved scheme that will provide a regular pension income.

For personal pension plans, the options available on retirement include:

  • Purchasing an annuity
  • Investing in an Approved Retirement Fund (ARF) or Approved Minimum Retirement Fund (AMRF)

You can go to the Pensions Authority website to get more information on your options at retirement.


With an annuity, you buy a regular pension income with all or part of your retirement fund. In return for you transferring your retirement fund to a life assurance company, the company will pay you a secure regular income for the rest of your life. The amount of this regular income depends on a number of things, including:

  • The amount of your retirement fund
  • Your age and state of health
  • Whether you are male or female
  • Whether your pension will continue to paid to any dependants on your death
  • The annuity rate that the life assurance company offers at that time

Approved Retirement Funds

An Approved Retirement Fund (ARF) is a personal retirement fund where you can keep your pension fund invested as a lump sum after retirement. You can withdraw money from it regularly to give yourself an income. Any money left in the fund after your death can be left to your next of kin. Because an ARF invests in various assets (such as shares, property, bonds and cash), your original investment is not guaranteed. This means there is a risk that your fund could get significantly smaller over time.

If you are under 75 and want to buy an ARF, you must have a guaranteed annual income of at least €12,700. To be considered guaranteed, the income must generally come from an existing pension or annuity. If you do not meet this income threshold, you must purchase an Approved Minimum Retirement Fund (AMRF).

An AMRF is a fund for people under 75 with a retirement income of less than €12,700 a year. You can transfer a maximum of €63,500 from your existing pension fund into the AMRF. You can only withdraw a maximum of 4% of the fund each year. An AMRF operates in a similar manner to an ARF, except you cannot withdraw any of your original capital until you reach 75 (you can only withdraw investment growth). Any remaining money left in the pension fund above €63,500 can be transferred into an ARF.

AMRFs automatically become ARFs when you:

  • Reach 75, or
  • Have a guaranteed annual income of €12,700 or over, or
  • Die

After death

If you die before retirement and have a personal pension, the accumulated funds form part of your estate and are distributed accordingly. Capital Acquisitions Tax (CAT) may apply.

Your annuity income is usually just for your own lifetime and generally does not go to your dependants when you die. However, there are some guaranteed annuity products that may pay out some benefit to your dependants

If you die after retirement and have invested in an ARF, the remaining funds form part of your estate but are regarded as your income in the year of death.

The tax treatment of ARFs when the holder dies depends on who inherits the ARF and in what manner.

If the ARF transfers into the name of the holder’s spouse, then no income tax or Capital Acquisitions Tax (CAT) is payable. However, the spouse will pay income tax on any withdrawals from the ARF.

If the ARF monies are inherited by the holder’s child, who is under 21 at the time of holder’s death, then no income tax is payable, although CAT may be payable depending on the total amount inherited.

If the ARF monies are inherited by the holder’s child, who is 21 or over at the time of the holder’s death, then income tax at rate of 30% is chargeable. However, CAT is not payable.

If the ARF monies are inherited by any other person (not being your surviving spouse or child) both income tax at the marginal rate and CAT is payable.

You can read more information on pension benefits payable on death.

Page edited: 3 April 2019