Understanding the Fair Deal scheme’s impact on an Approved Retirement Fund (ARF) can be complex. When participating in Fair Deal, many believe that 40% of drawdown income must be contributed. However, the actual calculation includes only the asset value of the ARF at the time of application, not the income drawn, to prevent double-counting. If an ARF is valued at €1 million, the assessed asset value is €928,000, excluding the first €72,000. For couples, when one is in care, 3.75% of assets is considered annually, rather than income. Misunderstandings exist, as both ARF value and net income are not factored; only the ARF’s asset value is part of the Fair Deal assessment.
Thus, if your ARF is worth €1 million, the yearly charge is €34,800 or €69,600 for joint care scenarios. To adjust to financial changes, request an asset review annually. To avoid asset assessment, consider an annuity instead of an ARF; however, income from annuities is subject to a 40% charge. Also, Fair Deal support is contingent on the State’s subsidy requirement; if your assessed contributions surpass the cost, you may be ineligible. To explore further or for expert advice, consult professionals as this column intends to provide general guidance.