John terminated his RAC and transferred the value to another RAC; the transfer value was subject to an early encashment charge. This indicates that:

• A. John terminated the first RAC within five years of starting it
• B. the first RAC was invested in a Property Fund
• C. John was under age 60 at the time of transfer
• D. John paid regular contributions to the first RAC

Answer: (A)

An early encashment charge on a RAC transfer shows the policy was terminated within the initial period, typically the first five years. These charges are built into RACs to recover initial costs if you end the contract early, so seeing a transfer value with such a charge indicates the RAC was closed within that five-year window. If it were just about investing in a Property Fund, being under age 60, or having regular contributions, none of those alone would explain the presence of an early encashment charge. The key point is the timing of termination relative to starting the RAC.