A staff member at the College of Food, Tourism and Creative Studies in Birmingham took out a teachers’ unit-linked AVC in 1989 under the impression that the initial investment charges for the scheme (5 per cent) were the same as for the with-profits scheme (1 per cent).

Shocked by the difference, Eddie McIntyre, the college principal, took up the case on his colleague’s behalf.

“The promotional literature promises ‘significantly lower charges’ for teachers’ AVCs, but it appears this doesn’t apply to the unit-linked scheme, ” says Mr McIntyre.

“There doesn’t seem to be much difference between the charges for the teachers’ unit-linked scheme and free-standing AVCs (FSAVCs).”

Mr McIntyre received a letter from the company admitting that it was “difficult to make a comparison as to whether one scheme is more beneficial than the other”.

In fact, figures released by the Prudential to The TES show charges for the teachers’ unit-linked scheme could amount to around Pounds 4,000 less over 20 years than charges for an FSAVC policy, to someone investing between Pounds 50 and Pounds 100 a month (unlike AVCs, which are commissioned by the occupational pension provider, FSAVCs are offered by a third party).

However, the costs of the unit-linked route could be significantly higher than for the with-profits scheme, a point which Mr McIntyre feels is not made sufficiently plain in Prudential’s promotional literature.

Unit-linked charges are relatively high for smaller contributions (less than Pounds 50 a month) - and may be larger in the policy’s earlier years, making it inadvisable to terminate early on.

Andrew Warwick-Thompson, who works for the actuaries Bacon and Woodrow, suggests that it is difficult to compare the charges. While unit-linked schemes have to spell out costs to the investor, charges for the with-profits policy are simply deducted from accounts before the bonuses are declared.

Fewer than 5 per cent of teachers have taken out unit-linked AVCs. Mr Warwick-Thompson says their volatility makes them unsuitable for the faint-hearted. “Anyone who’s going to lie awake at night after the policy value has gone down should invest in the with-profits fund.”

The investment returns of the unit-linked policy could be superior to the with-profits scheme in the long term, but the value of the units could also go down.

One option for younger teachers could be to invest a pro-portion in a unit-linked fund but to switch to a “safer” with-profits scheme as retirement approaches.