| A Retirement Annuity Plan is a pension plan which has | | | | Individual Retirement Annuity: |
| been designed to build a lump sum for retirement. | | | | An Individual Retirement Annuity is very similar to |
| The part of it can be utilized for the purchase of an | | | | Individual Retirement Account (IRA) only that the |
| annuity and the other part can be had as a tax free | | | | purchase of an annuity contract depends on a |
| lump sum. The introduction of the plan was made | | | | number of conditions. The issuing of these annuities is |
| under section 226 of the Income and Corporation | | | | made on the owner's name and the benefits are only |
| Act 1970. The plan is generally referred to as section | | | | given to the owner or the survival owner's |
| 226 contracts. It is also known as section 620 as it | | | | beneficiary. Moreover, the owner is not allowed to |
| has been later legislated under section 620 of the | | | | transfer the balance to others. The accounts may |
| Income and Corporation Taxes Act 1988. | | | | allow flexible premiums. |
| In 2001 there was an introduction of tax relief | | | | Individual Retirement Account: |
| claimed at source. The plan declares of income and | | | | Individual Retirement Accounts are also referred to |
| gains to be tax free (with exception of non - | | | | as individual retirement arrangements. Individual |
| reclaimable 10% tax credit). The tax free cash can | | | | Retirement Account is a device to earn and set aside |
| be withdrawn on maturity. The tax free cash lump | | | | funds for retirement savings. There are few types of |
| sum is calculated on the annual income. The Insured | | | | IRAs: |
| Retirement Institute Has recently launched a | | | | Traditional IRAs - It is established by individual tax |
| campaign to spread the idea of putting annuities and | | | | payers and is allowed to contribute 100% |
| other sources of guaranteed income at the base of | | | | compensation. |
| a retirement pyramid. The retirement pyramid has | | | | Roth IRAs - It is almost similar to Traditional IRAs, |
| been designed for the use of consumers and financial | | | | only difference being that Roth IRA contributions are |
| professionals. It suggests that consumers should | | | | not tax - deductible. |
| include annuities at the base of the retirement | | | | SIMPLE IRAs & SEP IRAs - These plans are |
| savings period, along with social security benefits and | | | | established by the employers. Individual participants |
| defined benefit pension income. | | | | also do have a contribution to the IRA. |