A combination of a collet and a shank for use with a rotary tool, wherein the shank comprises a cavity, and wherein the collet comprises: a bit holder defining a shank receiving bore; a passage opening to the shank receiving bore at a first end portion and opening to an outer wall of the bit holder at a second end portion, a transfer member movable in an axial and a radial direction within the passage between a first position and a second position; and a sleeve movable between an upper position whereat the transfer member is forced at least partially into the cavity of the shank, the cavity including a first end and a second end, when the shank is in the shank receiving bore and a lower position whereat the transfer member is free to move out of the cavity when the shank is in the shank receiving bore, characterised in that: the passage includes a first bearing portion and a second bearing portion; in the first position the transfer member is in contact with the first bearing portion but not the second bearing portion; and in the second position the transfer member is in contact with the second bearing portion but not the first bearing portion; wherein the passage and the transfer member have a difference in radius such that when the bit holder is rotated in a first direction and the transfer member is in the first position, the transfer member engages with the shank to transfer rotational force to the shank, and when the bit holder is rotated in the first direction and the transfer member is in the second position, rotational force is transferred to the shank through the transfer member, the second bearing portion limits a movement of the transfer member along a longitudinal axis of the collet, and an axial force is transferred from the second bearing portion to the transfer member and into the shank via one of the first and second ends of the cavity of the shank biasing the shank in a direction downwardly into the shank receiving bore; and a centering member positioned within the bit holder and configured to automatically grip the shank when the shank is positioned within the shank receiving bore. a bit holder defining a shank receiving bore; a passage opening to the shank receiving bore at a first end portion and opening to an outer wall of the bit holder at a second end portion, a transfer member movable in an axial and a radial direction within the passage between a first position and a second position; and a sleeve movable between an upper position whereat the transfer member is forced at least partially into the cavity of the shank, the cavity including a first end and a second end, when the shank is in the shank receiving bore and a lower position whereat the transfer member is free to move out of the cavity when the shank is in the shank receiving bore, characterised in that: the passage includes a first bearing portion and a second bearing portion; in the first position the transfer member is in contact with the first bearing portion but not the second bearing portion; and in the second position the transfer member is in contact with the second bearing portion but not the first bearing portion; wherein the passage and the transfer member have a difference in radius such that when the bit holder is rotated in a first direction and the transfer member is in the first position, the transfer member engages with the shank to transfer rotational force to the shank, and when the bit holder is rotated in the first direction and the transfer member is in the second position, rotational force is transferred to the shank through the transfer member, the second bearing portion limits a movement of the transfer member along a longitudinal axis of the collet, and an axial force is transferred from the second bearing portion to the transfer member and into the shank via one of the first and second ends of the cavity of the shank biasing the shank in a direction downwardly into the shank receiving bore; and a centering member positioned within the bit holder and configured to automatically grip the shank when the shank is positioned within the shank receiving bore. the passage includes a first bearing portion and a second bearing portion; in the first position the transfer member is in contact with the first bearing portion but not the second bearing portion; and in the second position the transfer member is in contact with the second bearing portion but not the first bearing portion; wherein the passage and the transfer member have a difference in radius such that when the bit holder is rotated in a first direction and the transfer member is in the first position, the transfer member engages with the shank to transfer rotational force to the shank, and when the bit holder is rotated in the first direction and the transfer member is in the second position, rotational force is transferred to the shank through the transfer member, the second bearing portion limits a movement of the transfer member along a longitudinal axis of the collet, and an axial force is transferred from the second bearing portion to the transfer member and into the shank via one of the first and second ends of the cavity of the shank biasing the shank in a direction downwardly into the shank receiving bore; and a centering member positioned within the bit holder and configured to automatically grip the shank when the shank is positioned within the shank receiving bore.