Your options at retirement in Ireland
When you retire with a defined contribution (DC) pension — an occupational DC scheme, a PRSA or an RAC — you do not simply start receiving a pension. You first take a tax-free lump sum, and then you choose how to draw an income from the remaining fund. In 2026 the State Pension (Contributory) provides up to €299.30 per week, but your private fund needs a strategy of its own. The two main choices are an Approved Retirement Fund (ARF) and an annuity.
The tax-free lump sum
You can take up to 25% of your pension fund as a tax-free lump sum, capped at €200,000. The next €300,000 of lump sum is taxed at 20%, and anything above €500,000 at your marginal rate. For example, with a €400,000 fund you could take €100,000 tax-free; with a €1 million fund, €200,000 tax-free plus €300,000 taxed at 20%. Taking the maximum lump sum is not always best — the money left in the ARF continues to grow tax-efficiently, so many people take only what they need.
Approved Retirement Fund (ARF)
An ARF keeps your pension fund invested after retirement, and you draw down income as and when you need it. It is the most flexible option: you control the investments and the timing of withdrawals. There are two rules to know. First, from age 60 to 70 you must draw down (or be deemed to draw down) at least 4% of the ARF value per year (5% from 71 to 80, 6% from 81) — this 'imputed distribution' is taxed as income whether or not you actually withdraw it, though you get a tax credit for it. Second, unless you have a guaranteed pension income of at least €12,700 a year (typically the State Pension counts), the first €63,500 of your fund must go into an Approved Minimum Retirement Fund (AMRF), which cannot be accessed until you are 75 (or meet the income test).
Annuity
An annuity converts your fund into a guaranteed income for life, purchased from an insurance company. It removes investment and longevity risk — you cannot outlive it — but the income is fixed (unless you buy an inflation-linked or 'escalating' version, which pays less initially), and if you die early the value can be lost unless you buy a guaranteed period (e.g., 10 years). Annuity rates depend on age, gender and interest rates; in 2026, rates remain well below the 4% ARF drawdown benchmark for most retirees, which is one reason ARFs have become the default choice in Ireland.
Vested PRSAs and other options
If you have a PRSA, you can 'vest' it from age 60 — taking up to 25% tax-free and either buying an ARF/annuity or drawing income directly from the vested PRSA (subject to the same 4% rules). You can also keep working and delay retirement: deferring your State Pension beyond 66 increases it (€313.40 at 67, €328.90 at 68, €345.70 at 69 and €363.90 at 70 in 2026), and you can keep contributing to a pension until 75.
Action steps
- Get a retirement illustration from your provider at least 12 months before you plan to retire.
- Compare ARF providers — charges and investment options vary widely.
- Get annuity quotes from several insurers; rates differ and you are not obliged to buy from your existing provider.
- Plan your lump sum: decide how much you actually need tax-free rather than automatically taking 25%.
- Take regulated advice if your fund is large or your situation complex — see our pension advice guide.
A worked example
Mary retires at 66 with a €400,000 DC fund and the full State Pension (€299.30 a week in 2026). She takes €100,000 tax-free (25%), leaving €300,000. With guaranteed State Pension income above the €12,700 threshold, she can put the full €300,000 into an ARF. Drawing 4% a year gives €12,000 of flexible income, on top of her State Pension of about €15,564 — a total of roughly €27,500 a year, with the ARF remaining invested. If instead she bought a level annuity, a 66-year-old might get around €13,000-€15,000 a year for life but with no flexibility and no residual value for her family. For most people with other guaranteed income, the ARF wins — but an annuity can be the right choice for someone who wants certainty and has no dependants to protect.
Drawdown strategies after 70
From age 71 the minimum ARF drawdown rises to 5% of the fund value, and to 6% from 81 — the 'imputed distribution' rules that force a minimum income and ensure the fund is eventually taxed. Strategies to consider: draw down only the minimum while you have other income, and reinvest surplus cash outside the pension for flexibility; use the tax-free lump sum early to clear expensive debt; and plan your drawdowns to stay within the 40% tax band where possible. If your ARF falls in value, the imputed distribution is recalculated annually on the new value, so the rules self-adjust. Keep an eye on pension tax changes in each year's Budget — the Standard Fund Threshold (€2.2m in 2026) and drawdown rules have both been adjusted recently.