Which of the following individuals does NOT have a source of relevant earnings for eligibility to contribute to a Retirement Annuity Contract?

• A. Seán, an employee who is included in his employer's DC pension scheme for retirement benefits
• B. Alice, an employee who is included in her employer's DC pension scheme for death-in-service benefits only
• C. John, a self-employed electrician
• D. Mary, a self-employed doctor

Answer: (A)

Relevant earnings are the income from employment or self-employment on which you can claim tax relief for a Retirement Annuity Contract. In general, earnings from work qualify, while passive or non-earnings do not.

In this scenario, Seán is part of his employer’s defined contribution pension arrangement for retirement benefits. When the earnings that fund retirement are already being directed into a workplace pension, there isn’t an extra, separate pool of earnings available to fund a RAC. In other words, his pay is already absorbed into the employer pension, so there isn’t a distinct source of earnings left that can be counted as relevant for RAC contributions.

John and Mary, as self-employed, have clear trading income that counts as relevant earnings, so they can contribute to a RAC. Alice, while her DC scheme is described as death-in-service only, still has employment earnings, which generally count as relevant earnings for RAC, so she would typically have a source of relevant earnings as well.