Retirement annuity contract (RAC) meaning

ARCHIVED This archived Practice Note reviews an earlier form of personal pension—the retirement annuity contract—and sets out how it contrasts with today’s personal pension arrangements. For further information on personal pension schemes, see Types of personal pension schemes—overview. Personal pension schemes—central role in private pensions sector Personal pensions, in their different guises, occupy a central place in the UK private pensions landscape today. Launched on 1 July 1988, they provide notable flexibility, being open to: employees (with employers allowed to pay in and obtain the tax relief without a tax charge arising for the employee) the self-employed (and, to a degree, individuals with no earnings) Retirement Annuity Contracts—background and aims However, personal pension schemes were preceded by another type—the Retirement Annuity Contract (RAC). Since the introduction of personal pensions on 1 July 1988, no fresh RACs can be established, but RACs set up before that date may continue and can still accept contributions. RACs were first created by the...

A-day 'A-day' is the widely used term for the broad pension tax 'simplification' reforms that began on 6 April 2006. The changes covered: how much pension contribution was allowed, the kinds of schemes an individual could invest in, the sums that could be taken (and when), and the choices available for any remaining fund. A-day also introduced the annual allowance and the (now abolished) lifetime allowance. See: Annual allowance and Lifetime allowance. AFPS AFPS: Armed forces pension scheme; see Practice Note: Public sector pensions and family proceedings. Accrual rate The speed at which pension benefits build as pensionable service is completed in a final salary scheme, eg 1/60 for each year of pensionable service. Accrued benefits The benefits earned in respect of service up to a specified date. Added years Extra pension provided by adding further years of pensionable service in a salary-related scheme. Such additional years are secured via transfer payments or through additional voluntary contributions/augmentation...

Accrual rate The speed at which pension entitlement builds as pensionable service is completed within a final salary arrangement, e.g. 1/60 for each year of pensionable service. Accrued benefits Benefits relating to service built up to a given date, measured with reference to current earnings or projected future pay. A-day ‘A-day’ is the widely used term for the broad pension tax ‘simplification’ reforms that came into force on 6 April 2006. These changes followed a 2004 government policy to rationalise the British tax system as it applied to pension schemes. The objective was to cut the volume of legislation accumulated under successive administrations, folding the previous eight tax regimes into a single regime for all personal and occupational pensions. Key areas covered included: how much pension contribution was allowed; the range of schemes an individual could invest in; how much an individual could withdraw (and when); and what could be done with the remaining fund. A-Day...