Tax Treatment
Contributions receive basic tax relief claimed at source (although this was only introduced in 2001). The income and gains in the plan are free from tax (with the exception of the non-reclaimable 10% tax credit). At maturity the tax free cash can be taken. The tax free cash lump sum is calculated with reference to the initial annual income. The formula is often described as: the tax free cash is equal to three times the residual income.
This tax regime is being abolished under pension simplification introduced on A-day.
Read more about this topic: Retirement Annuity Plan
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