Retirement Annuity
Contracts (RACs) are a type of pension plan that individuals could
take out before 1 July 1988, when the current form of Personal Pension Plan (PPP)
was introduced.
RACs were only available
to those in employment where there was no access to an occupational scheme and to
those in self-employment, provided they had earnings subject to UK
taxation.
After 1 July 1988, no new RACs could be taken out but those with
such contracts were able to continue to contribute to them. While
the new personal pension plans were designed on similar lines to
RACs, there were some areas in which they differed. RACs were
allowed to retain some features that did not apply to PPPs.
From 6 April 2006, under new rules introduced by HM Revenue & Customs,
RACs were put on the same basis as PPPs and almost all of their
special features no longer apply.
Q & A's
Yes, this is one of the special features that will still be
allowed provided your insurance company permits it.
This practice will only be allowed to continue until 5 April
2007. After that date it must be paid net of tax under the PAYE
system.
For contributions from 6 April 2006, there is not any carry back
if but you have already made plans to take advantage of the
previous practice, you will still be able to do so in relation to
any contributions originally paid in the tax year ending 5 April
2006. Therefore any election to carry back for this tax year can
still be made by 31 January 2007.
The carry forward facility is no longer available.
No, that basis is no longer allowed. The maximum tax-free cash
sum is now 25% of the fund value.
