Other pension arrangements
For a number of years, the government has been keen to encourage people to save for retirement in order to ensure that they have enough to live on. This is particularly important as we are living longer.
A number of arrangements have been introduced in order to give people access to savings vehicles, including additional voluntary contributions (AVCs), free-standing AVCs (FSAVCs), stakeholder pensions, personal pensions and, still in the preparation stages, personal accounts.
AVC arrangements are set up as an add-on to occupational schemes, providing additional benefits to top-up the provision provided by the main scheme.
You opt to make a set contribution and this money is invested until you wish to purchase an annuity with it in order to provide an annual pension. 25 per cent of your AVC fund value can also be taken as tax-free cash, subject to a maximum amount.
The advantages of AVC funds are that you choose how much you want to contribute and they can be flexible depending on your working pattern and often have low charges. They also take advantage of economies of scale, since the investments are grouped with other investors from your occupational scheme.
You do not know, however, the level of benefit it will provide in retirement, since that is dependent on a number of factors including investment choices and return, when you retire and annuity costs on retirement.
These are very similar to AVCs but are not connected in any way to the main scheme.
All employers have to make a stakeholder scheme available to its employees but they are not obliged to make any contribution to it. Most people who use stakeholder pensions do not have good occupational pension schemes, but the advantage of stakeholder schemes is that they have relatively low running costs.
The government intends that from 2012 all eligible workers will be automatically enrolled into either a good quality workplace pension scheme or into the personal accounts scheme.
Personal accounts are aimed at those with low to median incomes, who currently have no access to a good workplace pension scheme. In this respect, it is unlikely that most ATL members will need a personal account, although this may have an impact on supply teachers via agencies.
Employers will be obliged to make a three per cent minimum contribution, the employee four per cent and the government around one per cent, by way of tax-relief.
Personal pension plans
As a result of changes in legislation, it has been possible from 1 October 2006, for teachers aged over 55 years to transfer their benefits from the in-house additional voluntary contribution (AVC) scheme to another investment vehicle.
It came to the attention of the teachers' panel of the Teachers' Superannuation Working Party (TSWP) in 2007 that a large number of teachers have transferred their funds out of the in-house AVC scheme into investment funds that are likely to be to their disadvantage.
The teachers' panel therefore commissioned Hewitt's (Consulting Actuaries) to prepare a report on the issue which is available to all teachers who are members of the teacher associations that make up the teachers' panel of the TSWP.
Need more help on pensions?
For further information or for specific advice on pensions issues, please contact the pensions team at ATL's London office. The telephone number for pensions enquiries only is 020 7782 1600. Please ensure that you have your membership number and relevant papers to hand when contacting ATL.
Planning for your retirement involves many important and sometimes complex decisions. Endsleigh has been appointed by ATL as the preferred provider of financial advice, should you wish to seek this. Please visit their website or call 0800 917 8875 for more details. Telephone lines are open Monday – Thursday 9am – 8pm and Friday 9am – 5pm. Retirement planning DVDs and seminars are available upon request.