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Compare costs of extra payments

ANDREW WARWICK-THOMPSON answers your questions. Q. I am 45, and will have 24 years' service at my normal retirement age of 60. I intend to start additional voluntary contributions shortly to boost my Teachers' Superannuation Scheme.

Apart from the initial paperwork for the Inland Revenue, are there any advantages of the approved scheme with the Prudential, or could I get better returns (and more flexibility) with free-standing AVCs, in which case are there any guidelines to help me choose the best company?

I pay tax at the basic rate, so I presume I can pay the FSAVC amounts net of tax relief, without having to reclaim tax from the Inland Revenue.

A. The Prudential AVC scheme has been available since 1989, since when more than 90,000 teachers have chosen to use the scheme for their retirement savings. The scheme benefits from specially negotiated charges which reflect the economies of scale of this large group pension arrangement. If you choose an FSAVC, the charges will almost certainly be higher than the Prudential scheme - so your contributions will have to earn a higher rate of investment return just to cover the additional costs.

Comparing costs is technically quite difficult - the easiest way is to ask Prudential and a few FSAVC providers to produce some pension projections for you. Under the Financial Services Act regulations now in force, pension providers have to produce projections on a consistent basis and using the actual charging structure of their contract, so you can see the impact of charges clearly in the different pension funds they project. You can obtain more information about the Prudential AVC scheme by writing to Prudential Pension Fund Services, Teachers' AVCs, Freepost, Reading, RG1 1BR. For information about FSAVCs, you should contact an independent financial adviser. Finally, you can pay your contributions net of basic rate income tax to either an AVC or to a FSAVC contract - in this respect, there is no difference between the two.

Andrew Warwick Thompson is a lawyer who works for Bacon and Woodrow, the international firm of actuaries and consultants. Readers who wish to put questions to him (no names will be published) should write to the Personal Finance Desk, The TES, Admiral House, 66-68 East Smithfield, London E1 9XY. No personal correspondence will be entered into and no legal liability will be accepted for the advice offered.

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