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The capital sum must be Vested (used to provide benefits) between age 50 and 75. On vesting a tax-free lump sum of up to 25% of the fund can be taken but the remainder must be used to provide an income either through a drawdown arrangement or through the purchase of an Annuity . Under current rules an annuity must be purchased at age 75 even if a drawdown arrangement is in place. Although this will no longer be the case after April 2006. Contributions can be made either from the individual or from an employer. Under current rules the contributions are limited to percentage of gross income that increases with age, although again these rules will be relaxed from April 2006. These plans were first introduced in 1987 to replace Retirement Annuity Plan s. TAX TREATMENT Personal contributions receive basic rate tax relief claimed by the provider. That is: a £78 contribution will be grossed up to £100 on payment to the provider. Higher rate taxpayers can claim additional relief through their tax return. An employer's contribution is paid gross and is an allowable expense against income or corporation tax. SEE ALSO EXTERNAL LINKS |
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