Q - I have input that income form the ARF should be used ‘as needed’. So why is Voyant less than is needed to meet expenditure? Why would it not use up the funds completely to bring them up to the base line? Why is it just taking a little bit from it for a couple of years and leaving them with a massive expense shortfall, then maxing out and using it all up when the client is age 69?
A - A minimum balance is ring-fenced within an AMRF until either the client reaches age 75 or achieves a minimum level of secured retirement income from state pension benefits, annuities, and/or defined benefit schemes or a combination of these to release this minimum balance requirement.
If secured retirement income is less than €12,700 pa, then the AMRF applies with a minimum balance of €63,500 until either the minimum secured retirement income is reached or until the owner turns 75.
You can view these details on the Let's See charts by clicking any bar in a year in which the client is to receive retirement income. The chart legend will appear in the middle of the screen. Click Detailed Info at the bottom of the legend. The chart details panel will appear in the middle of the screen. Click the Pensions tab. On this tab you will see the AMRF subaccount that is created to hold this minimum balance, at least until the conditions notes are met.
In this example, the owner will crystallise €95,000 into the ARF initially, which provides enough income for the first two years of the plan. He has less than €12,700 pa in secured retirement income, which comes from state pension benefits, which are escalating. Therefore, €63,500 of these funds are ringfenced into an AMRF. When the balance in the pension falls close to €63,500, only the amount above this minimum can be withdrawn, which in some years is only the growth on the €63,500 in the AMRF.
He has less than €12,700 pa in secured retirement income until age 69, at which point his the escalation of his state pension benefits exceeds the €12,700 pa, allowing this ringfence to be lifted and the maximum amount available released from the ARF to pay expenses. The pension is depleted at that point in time. In the years prior, only the amount on balance exceeding €63,500 is available for income.