Tax allowance and revenue rules on deductions in year one draws from ARF?

I plan to start an ARF and start drawing down 4% in June 2026 (I will also take my tax efficient 25% lump sum). 2 things for clarity I would appreciate input on. A) are tax free allowances for 2026 all be applied to pension from June (if no income due pre then)? B) given the revenues rule of draw down of 4% of the value of the ARF per annum (but I will start drawdown in June) - is the 4% defined by revenue as applicable per calendar year or 12 months from date one starts drawing? Thanks in advance.

Islandfielder said:

A) are tax free allowances for 2026 all be applied to pension from June (if no income due pre then)

Click to expand...

Your question is a bit unclear. Do you mean tax credits (tax free allowances haven't been a thing for many years) and standard rate cutoff point? These are awarded annually and apply to whatever your annual income is regardless of when you start receiving it. So for 2026 you will have whatever the relevant tax credits and SRCOP are for the year and they will be applied to your income for the year even if you only start drawing it from June. These are the current credits/SRCOP but Budget 2026 may change them.

Islandfielder said:

B) given the revenues rule of draw down of 4% of the value of the ARF per annum (but I will start drawdown in June) - is the 4% defined by revenue as applicable per calendar year or 12 months from date one starts drawing?

Click to expand...

I believe that the 4% applies for the calendar year and to the valuation of your ARF on November 30th of the year.

LDFerguson said:

The 4% requirement is based on the value of the ARF at 30th November. It's not pro-rated for parts of the year. So, for example, if you start your ARF on 1st November you must still withdraw the full 4% of its value by the end of the year. If you start your ARF in December you don't have to take any income in that year.

Click to expand...

Yes indeed (credits). That’s what I assumed re annual nut good to have confirmation.

Regarding ARF given it will only be active from June and valuation November - does that mean 4% of the ARFS value will need to be drawn in those 5 months? In effect the 4% for the year drawn in a 5/6 month period?

Islandfielder said:

In effect the 4% for the year drawn in a 5/6 month period?

Click to expand...

That's what I understand. 4% of the value at November 30th must be taken for June-December. (I'm assuming that you're 61 in 2026).

Many thanks @ClubMan yes - my research and calculations had led me here but was really keen to have clarification or confirmation I was interpreting correctly. Best and thanks again.

The taxation of your first ARF income will depend on whether your tax credits are assigned on a week 1 / month 1 basis or a cumulative basis. When you are arranging the assigning of your tax credits to your ARF provider Revenue are generally very helpful in this regard.

Standard Life produce a very good brochure which deals with the taxation of pension income in retirement. Its available here: Standard Life guide to pension payments

Many thanks @Smoneen this guide is very clear and will be useful. Haven’t yet decided where to activate the ARF. Am considering Standard Life (as interested in Vanguard index tracker) but I understand they will only deal with one through a broker and I was hoping to not have to use one. Have you used SL and how have you found them?

Islandfielder said:

I understand they will only deal with one through a broker

Click to expand...

Not true

Islandfielder said:

Am considering Standard Life (as interested in Vanguard index tracker)

Click to expand...

Other pension providers offer similar index trackers.
E.g. Royal London Ireland.
(The thread title says PRSA but they also do ARFs and a lot of the discussion in that thread applies to both).