Lucy is retiring from her employer's DB pension scheme, on a pension of €24,000 per annum. She has a separate AVC fund of €150,000. If she uses €100,000 of her AVC fund to provide her maximum tax-free lump sum, what happens to the €50,000 balance?

• A. She must use the €50,000 to buy an annuity
• B. She must take the €50,000 as a taxable lump sum, subject to PAYE
• C. She can take €12,500 as an additional lump sum and transfer €37,500 to an AMRF
• D. She can transfer the €50,000 to an ARF or take as a taxable lump sum

Answer: (D)

The situation hinges on what happens to the portion of the AVC fund that isn’t used for the tax‑free lump sum. When you retire, you can take a tax-free lump sum from AVCs up to the permitted amount, and the balance isn’t locked into an annuity. That remaining balance can either be transferred into an Approved Retirement Fund (ARF) to stay invested and draw income, or it can be taken later as a taxable lump sum.

In this case, after taking the 100,000 as the tax-free portion, 50,000 remains. That balance isn’t forced into an annuity; it can be moved into an ARF or taken as a taxable lump sum, subject to tax. The other options (buying an annuity or transferring to AMRF in this context) don’t reflect the available flexibility.