Retiring in Ireland 2025/26? | Your Irish Pension Options Explained
— ARF, Annuity & Tax-Free Lump Sum Guide
Planning your pension at retirement is essential for financial security.
In Ireland, knowing your options—from a tax-free lump sum to annuities and Approved Retirement Funds (ARFs)—helps you maximise income and gain peace of mind.
This guide covers key pension choices.
When you retire, your pension becomes a crucial source of income. Understanding your retirement pension options helps you make informed decisions for financial security in your golden years.
At retirement in Ireland, you can take up to 25% of your pension fund as a tax-free lump sum. As of 2025, the tax-free lump sum limit is €200,000, with the next €300,000 taxed at just 20%. You can use this lump sum to cover expenses like home improvements, paying off debts, or fulfilling other personal goals. See FAQ questions 1.
After taking your lump sum, you need to decide how to generate ongoing retirement income. One popular option is purchasing an annuity, which converts your pension pot into a guaranteed lifetime income, providing financial certainty and removing investment risk. However, annuity payments are taxable and usually cease upon your death unless additional guarantees are selected.
Alternatively, you can choose an Approved Retirement Fund (ARF). An ARF allows you to keep your pension invested after retirement and withdraw income flexibly based on your needs. Income withdrawals from an ARF are taxable, and the invested value can fluctuate with market performance. An ARF also offers the advantage of passing any remaining funds to your beneficiaries.If you have pensions from previous employers, a Personal Retirement Bond (PRB) helps preserve those benefits by keeping the funds invested and tax-efficient until you retire.
Summary
At retirement, you first access your pension savings through a tax-free lump sum. Then, you decide between retirement income options such as an annuity or an ARF to meet your financial needs. Careful planning and understanding these choices allow you to maximise your pension income and enjoy peace of mind in retirement. Even small financial adjustments before or at retirement can have a big impact on your future income.
Frequently Asked Questions (FAQs) – Your Pension Questions Answered
Planning your retirement can feel overwhelming — especially when it comes to understanding pensions in Ireland. This FAQ guide breaks down the essentials you need to know about tax-free cash, retirement income options, and what happens to your pension after you retire. Use these clear answers to help you make confident decisions for your financial future.
1. How much tax-free cash can I take from my pension in Ireland?
You can take up to 25% of your pension tax-free, subject to a maximum limit of €200,000.
If your pension fund is €800,000 or less, you can take 25% of the total amount tax-free.
If your pension fund is greater than €800,000, you can still take 25% of the total, but:
The first €200,000 of this amount is tax-free.
The next portion, between €200,000 and €500,000, is taxed at 20%.
2. Should I choose an ARF or an Annuity at retirement?
Annuity: Provides a guaranteed income for life, giving you financial security and peace of mind.
Approved Retirement Fund (ARF): Keeps your money invested with flexible withdrawals and lets you leave remaining funds to your heirs.
Choose an annuity for certainty, or an ARF for control and inheritance options.
3. What happens to my pension fund if I die after retirement?
Annuities usually stop payments after your death unless a guaranteed period or spouse’s pension applies.
ARF funds can be inherited by your spouse or family, tax rules apply.
Others may face tax depending on their relationship to you.
Pension funds form part of your estate and may be liable to inheritance tax.
For personalised advice, discuss your options with a qualified financial advisor.
4. Can I keep working while drawing my pension?
Yes, many people continue working after retirement age to supplement income or boost pension savings. Check your employer’s or pension scheme’s policies for any specific conditions.
5. Do I need financial advice before accessing my pension?
I, Stephen Donnelly, a qualified financial advisor, specialising in retirement planning, recommend seeking advice before making any decisions, as this can help you make the best choice for your future.
Taking control of your pension means understanding your options clearly. Use Tips for a successful retirement guide as a starting point, and talk to a financial advisor to tailor a retirement plan that’s right for you.
Updated Ireland 2025 Pension Option Figures
| Pension Option | Flexibility | Income Security | Typical Amounts & Withdrawals | Tax Treatment | Who It’s For |
|---|---|---|---|---|---|
| Tax-Free Lump Sum | High | Low | Take up to 25% of your pension fund, max €200,000 tax-free | No tax up to €200,000; 20% tax on €200,001-€500,000; higher rates beyond | Everyone |
| Approved Retirement Fund (ARF) | High | Medium | Must withdraw minimum 4% per year from age 61, increasing to 5% at 71 | Withdrawals taxed as income (PAYE), PRSI & USC may apply | Those wanting flexible income |
| Annuity | Low | High | Guaranteed regular income (example: about 5.3% of lump sum annually) | Taxed as income (PAYE) | Those seeking certainty and steady income |
| Personal Retirement Bond (PRB) | Medium | Medium | Similar withdrawal and tax rules as ARF and Annuity | Tax depends on how benefits are drawn | People moving jobs or wanting flexibility |
These figures are based on Irish Revenue rules and pension industry sources Revenue.ie for 2025 and reflect the standard options and tax bands in place this year. This article and graph is for general guidance only and does not constitute financial advice.
For tailored pension advice or help transferring your pension after retiring, contact Stephen Donnelly (QFA) (RPA) at Donnelly Financial Planning — regulated by the Central Bank of Ireland
Author, Stephen Donnelly, QFA, RPA
Managing Director, Donnelly Financial Planning Ltd
Regulated by the Central Bank of Ireland.
Disclaimer:
This article is for general guidance only and does not constitute financial advice.
Please consult a regulated financial advisor for tailored recommendations.
Donnelly Financial Planning Ltd is regulated by the Central Bank of Ireland.
