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Annuity vs ARF for a €1m Pension Pot in Ireland

November 3, 2025

Paddy Delaney

If you’re retiring in Ireland with around €1 million in pension savings, one of the biggest questions you’ll face is whether to take income from an ARF (Approved Retirement Fund) or to buy an annuity.

In this episode, we break down both options in plain English — what they mean, how they work under Irish tax rules, and which might suit your lifestyle and risk appetite.

Key Points:

What’s an ARF?

A flexible post-retirement investment account where you stay invested and draw income as needed — but you take on the investment risk.

What’s an Annuity?

A guaranteed income for life, purchased from an insurer. No control or inheritance, but total certainty on your monthly income.

Typical Income from a €1m Pension

  • - ARF (4% drawdown) → ~€40,000 per year
  • - Annuity (4.75% rate) → ~€47,500 per year
    Both are taxed under PAYE.
  • Taxation

    ARF and annuity income are both taxed like salary — Income Tax, USC, and PRSI (if under 66).

    Pros and Cons

    ARFAnnuityFlexible, inheritable, growth potentialFixed income, no investment riskMarket risk, ongoing managementNo capital access, inflation risk

    Blended Approach

    Many retirees use both — annuity for essential bills, ARF for flexibility and growth.

    On Death:

    - ARF can pass to spouse or children (taxed).

    - Annuity stops unless spouse/guarantee is added.

    This decision isn’t about chasing the highest return — it’s about matching your income source to your comfort level.

    I hope it helps.

    Disclaimer

    The content of this site including blogs and podcasts is for information purposes only. Everybody’s financial situation is different and the content we share on our site and through podcasts may not be applicable to you. 

    The articles, blogs and podcasts are not investment advice. They do not take account of your individual circumstances, including your knowledge and experience and attitude to risk. Informed Decisions can’t be held responsible for the consequences if you pursue a course of action based on the information we share

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