The benefit of using an ARF is that your accumulated fund continues to be invested and grows tax free in capital value, after you retire.
Similar to when the pension investor needed an investment strategy while accumulating their pension fund up to retirement, another strategy is now required to continue to grow the pension fund while in retirement.
Recent changes to tax legislation have impacted the way ARF’s are taxed. Now, even if there is no drawdown of income from the ARF, a tax liability will be assessed each year on an assumed drawdown value.
The major benefit of an ARF over an annuity contract is the ability to transfer capital to an individual’s estate, after the death of the retiree. Unlike an annuity contract that ceases upon the death of the retiree (unless purchased with a guaranteed term), the balance of the ARF is passed on to the deceased retiree’s estate.
Depending on your pre retirement pension arrangements and your individual circumstances, your post retirement arrangements may include an ARF and an annuity contract.
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