Sam is maturing a Retirement Annuity Contract with no other pension arrangements. To avoid investing part of the RAC proceeds in an AMRF or an annuity purchase, what level of pension income should he be in receipt of at that time?

• A. €7,200 per annum
• B. €12,700 per annum
• C. €10,000 per annum
• D. €18,000 per annum

Answer: (B)

The key idea is that when a Retirement Annuity Contract matures, the rules about using AMRF funds or buying an annuity depend on how much pension income you already have. If you are already in receipt of a minimum level of pension income, you can direct the RAC proceeds into an Additional Retirement Fund (ARF) rather than being forced to fund an AMRF or purchase an annuity with part of the proceeds. That minimum level is €12,700 per year. So, to avoid having to lock part of the RAC into an AMRF or an annuity, the payer needs to be in receipt of at least €12,700 of pension income at that time. The other figures don’t meet this threshold, and thus wouldn’t allow avoiding the AMRF/annuity route.