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HMRC internal manual

Inheritance Tax Manual

Pensions: types of pension scheme: Retirement annuity contracts (RACs)

Retirement annuity contracts (RACs) were the forerunners of personal pension plans. No new RAC could be taken out on or after 4 January 1988. But individuals who entered into these contracts before that date can continue to make contributions and there are still large numbers of these in existence.

A RAC is an annuity policy between an individual and an insurance company and was originally aimed at the self-employed who did not have access to an occupational pension. In general, the terms of these contracts are far less flexible than for other personal pension policies.

From 6 April 1980 it has been possible to assign any death benefits on trust but, before that date, any lump sum death benefit could only be paid to the estate.