Posted by jasminjade on 03 July 2001 at 11:11:04:
The following letter appeared in the Financial supplement of the Mail on Sunday (1/7) - could this be an IBMer
J.M. writes: I am 44 and earn £26,000 a year. I am a member of my company
pension scheme and make
additional voluntary contributions of £100 a month
into Equitable Life.
Should I continue this arrangement, or would a stakeholder pension be better.
J.S. replies: People earning less than £30,000 a year who are in a company
pension
scheme can now also save up to £300 a month in a stakeholder pension
and get full tax
relief on their contributions. This is a better option than
AVCs, which tend to be more rigid.
With a stakeholder plan, you could build up a pension bigger than the
two-thirds of final
salary allowed under a company pension scheme.
It will also provide an extra tax-free lump sum when retiring - something you
do not get
with AVCs.
There is another angle to consider - the problems at Equitable Life that have
forced it to
penalise investors who want to move their funds elsewhere.
If your Equitable AVC is invested in the Equitable's with-profits fund and
you go on making
regular contributions, you are increasing the potential
penalty that could be slapped on you
if at some time in the future you
decided that you wanted to move out of Equitable Life.
Stakeholder plans are penalty-free, you can never be held to ransom if your
plan falls short
of expectations and you decide to switch to another fund
manager.
So I can see no disadvantage to switching your AVC contributions to a
stakeholder
pension plan.