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Pensions

Stakeholder Pensions

Originally Stakeholder Pensions were intended for the low paid without an occupational pension. It can now be used by those earning less than £30,000 to increase their pensions. Three quarters of Teachers fall into this category. Teaching unions are expecting to reach agreement with local authorities over the new arrangements, and have the new scheme up and running by April.

Most teachers would be eligible to join the stakeholder scheme. Teachers not in the Teachers' Pension Scheme, for example in some independent schools, would also benefit as all employers with five or more employees on their books must offer a stakeholder scheme if they don't offer an occupational pension.

One of the current ways for topping up a retirement pension is the Additional Voluntary Contribution scheme (AVC). Many teachers may prefer a stakeholder scheme to the AVC. The stakeholder pension is tax free, likely to have a lower management charge (around 0.85%) and has a higher contribution limit. Another advantage is that instead of the pension being tied up with an annuity, up to 25% of the pension can be taken as a tax-free lump sum.

It is important that people get good advice; there are fears that a pension mis-selling situation - as in the 1980's - could result, and end up with some in unsuitable schemes.

The teaching unions are arguing for a teachers' stakeholder pension, which will be part of an existing TUC scheme. This scheme is overseen by trustees and organised by the Prudential.

Government pension helpline 0845 6012923.

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