Retirement Annuity Contracts (RAC)—older types of personal pension schemes

Produced in partnership with Wyn Derbyshire of gunnercooke LLP

Practice notes

Retirement Annuity Contracts (RAC)—older types of personal pension schemes

Produced in partnership with Wyn Derbyshire of gunnercooke LLP

Practice notes

Personal pension schemes—central role in private pensions sector

Personal pension schemes, in their various forms, play a central and important role in the UK private pensions sector today. They were first introduced on 1 July 1988 and offer a considerable degree of flexibility in that they are available to:

•
employees (with employers being permitted to contribute and claim the tax relief without a tax penalty falling on the employee)
•
the self-employed (and even to non-workers to an extent)

Retirement annuity Contracts—background and aims

However, personal pension schemes were preceded by another type of pension scheme—the Retirement Annuity Contract (RAC). Following the introduction of personal pension schemes on 1 July 1988, it is no longer possible to establish new RACs, but RACs established prior to that date can continue in operation and contributions can still be made to them.

RACs were first introduced by the Finance Act 1956 as defined contribution arrangements for individual members. They were subsequently governed by section 226 of the Income and Corporation Taxes Act

Wyn Derbyshire

Partner, gunnercooke LLP

Wyn is a partner at gunnercooke LLP and specialises in pensions, trust and employment law in all industry sectors, dealing with the transactional, advisory and documentation aspects.

He also has wide experience of the pensions implications of heavyweight corporate transactions and flotations, the issues arising from the establishment and merger of pension schemes, and sex equalisation and other discrimination issues in respect of benefits provided by pension schemes. In addition, he provides advice to pension scheme trustees generally.

Recent transactions include advising Amcor on pension matters relating to the acquisition of Alcan business and the acquisition of Northern Foods PLC by Boparan Holdings.

He is a co-author (with Stephen Hardy and Stephen Maffey) of TUPE: Law and Practice, published by Spiramus Press (now in its 4th edition), and co-author (with Stephen Hardy and David Wicks) of Money & Work, published by Spiramus Press in August 2007. He has also written several other books and numerous articles on a variety of legal and non-legal topics.

Jurisdiction(s):

United Kingdom

Key definition:

Retirement annuity definition

What does Retirement annuity mean?

An annuity contract between an insurance company or friendly society and a self-employed individual or a person in employment who did not have access to an occupational pension scheme, which was established before 1 July 1988.

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