Need help please re paying tax on ARF drawdowns.

A

acequion

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I am a retired teacher, therfore public sector and I use My account with Revenue. While working I was paying into an AVC, to Zurich Life, with a view to supplementing my retirement income. It's a small amount, the value now is about €40.000 Cornmarket matured the AVC and got the approved retirement fund set up for me. However I am very confused about the tax situation. I'm 66, no longer paying PRSI, my income is my retired teachers pension, plus the DSP pension [contributory] and that gives me a total income of about €39.000 per year. Hence I'm in the 20% tax bracket. I will be drawing down 10% yearly from the ARF, starting at the end of this month, May 2026 yielding me an extra €4.000 approx before tax.

I'm confused about two things. 1. Zurich sent me a letter informing me that they would register the payment with Revenue but that I must ensure that I have the appropriate allowances allocated to my Zurich Life Tax Credit Certificate. No idea what this means and what are "appropriate allowances"? I've logged into My Account and I see the Zurich payment listed under Jobs and Pensions, along with Retired Teachers, my main income source. My DSP pension is under Extra Income and I note that all tax credits are under Retired Teachers. Is all that not ok as it is? Do I need to do anything?

The second thing I'm confused about is that Cornmarket told me that the tax taken would be 40% though I'm in the 20% bracket. Therefore I will need to claim the extra tax back. Cornmarket offered to do this for me but at a cost of €30 monthly. That seems a lot, so can I do it myself and if so, how and when? Once a year? I really appreciate any help as I find it confusing.

One other question please. Do I really need to drawdown 10% yearly? Is the minimum not 4%? I would like the fund to last as long as possible and with 10% drawdowns it would be depleted in about 10 years. Can one modify the yearly draw down amount?

Thanks so very much in advance for any help or guidance with this. I would like to simplify the process going forward and cut out the middleman if possible.
 
acequion said:
The second thing I'm confused about is that Cornmarket told me that the tax taken would be 40% though I'm in the 20% bracket.
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Sounds to me be like Cornmarket are mistaken here if your total income from all sources is within your SRCOP (Standard Rate Cut-Off Point) band.
 
acequion said:
I've logged into My Account and I see the Zurich payment listed under Jobs and Pensions, along with Retired Teachers, my main income source. My DSP pension is under Extra Income and I note that all tax credits are under Retired Teachers. Is all that not ok as it is? Do I need to do anything?
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Log into myAccount again. From memory there should be some option (on the left) labelled something like 'split my credits/allowance between incomes'.

Click on that and u will be taken to a page that asks you to estimate your income for each of your 3 income sources.

Based on your input, the website will do a quick calculation and divide your credits and tax bands + USC bands between those incomes.

U can accept the Revenue suggestion and that's it job done.

The payroll departments for each of your three income sources will receive a tax cert advising them how much tax to calculate each month.

If your overall income is <44,000 you will be correctly taxed at 20%.
 
acequion said:
Cornmarket told me that the tax taken would be 40% though I'm in the 20% bracket. Therefore I will need to claim the extra tax back. Cornmarket offered to do this for me but at a cost of €30 monthly.
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I've seen them try this before. They try to push PAYE taxpayers into their tax service despite it not being needed. It's disgraceful and completely unethical.

They are lying about the 40% tax.
acequion said:
Is the minimum not 4%?
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Yes
 
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Fortune said:
It's disgraceful and completely unethical.
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And yet the unions and employers insist on keeping them on as their preferred pension/AVC provider? Shocking.

New Ireland charging AMC of 2.75% on AVCs!

Moved from another thread to highlight. These charges are scandalous and are set out in this post Brendan When you started the AVC, you selected funds into which to put your savings. Yes, or rather, they were selected for me, on the basis of my risk profile. The fund hasn't performed that...
www.askaboutmoney.com
 
acequion said:
I'm confused about two things. 1. Zurich sent me a letter informing me that they would register the payment with Revenue but that I must ensure that I have the appropriate allowances allocated to my Zurich Life Tax Credit Certificate. No idea what this means and what are "appropriate allowances"? I've logged into My Account and I see the Zurich payment listed under Jobs and Pensions, along with Retired Teachers, my main income source. My DSP pension is under Extra Income and I note that all tax credits are under Retired Teachers. Is all that not ok as it is? Do I need to do anything?
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You are under no obligation to allocate any of your tax credits and SRCOP to this ARF employment.

It may make sense to do so, depending on your other incomes.

I do the tax return of a retired teacher, and no tax credits / SRCOP are allocated to the ARF employment. This means that the ARF provider taxes the annual ARF drawdown at 40%.

Assuming that you are single, and that the CSP + PS pension makes up €39,000, then you should allocate some of your SRCOP to the ARF employment. This will mean the ARF is taxed at 20%, rather than 40%.

There is no need to go near Cornmarket brokers, Zurich or the DES to deal with the income tax.
 
Thanks so very much everyone for all the help and information above. Proof, once again, that those of us not skilled in figures and matters financial would be lost without this excellent site.

I was suspicious about Cornmarket's claim about 40% tax and their offer to sort it for me at a big cost. I had used them to mature the AVC as I had taken it out on investment only, no advice basis with Zurich and needed help to mature the policy. Like all middlemen, Cornmarket have their uses but limited.

So if I understand correctly I can now do two things. 1. Decide on the exact draw down percentage that I need,above the minimum 4%. Will a phone call to Zurich get the ball rolling on that or is it more complicated? I'd prefer to avoid having to go back to Cornmarket.
Then 2. Sort out the taxes myself based on the excellent advice above so that everything remains at 20% and it's clear cut.

Hopefully that sorts the problem. Thanks again.
 
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