Annuities

Retirement Annuity Contracts (RAC's)

Retirement Annuity Contracts were replaced by Personal Pension Plans in April 1988. and new RACs have not been available since 30th June 1988.
Further contributions may be made to existing contracts, and are still a valuable retirement planning tool, especially to those earning above the 'earnings cap' which restricts the amount that can be invested in a Personal Pension Plan.
They cannot be used for contracting out purposes and no employer contributions are allowed into these plans.

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Annuities

The amount of pension payable from a Personal Pension is determined by the amount of money accumulated within the fund and annuity rate at the time.
Pension benefits must normally be taken between the ages of 50 and 75, but with the following exceptions:

• If the annuitant was in an occupation where an earlier retirement age has been approved by the Inland Revenue e.g. athletes, professional footballers
• On the grounds of serious ill health

The pension must be payable for life, but may be set up with a guaranteed payment period of up to 10 years; the more usual period is 5 years.

In return for a lower pension, a spouse's or dependant's pension can be provided for payment upon the annuitants death, but the level of the dependant's pension must not exceed the member's own pension.

At retirement, in many cases you are able to exercise an open market option. This allows you to transfer the accumulated value of your pension fund to any life office or friendly society to purchase benefits. This enables you to obtain the best annuity rates available on retirement. Smokers, and those in ill-health may also benefit from exercising an open market option as several providers will offer such clients higher annuities.

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