How to nurture a nest egg

바카라 사이트 추천S reporters unravel 바카라사이트 tangle of pension options facing staff three years after 바카라사이트 reorganisation of higher education and examine 바카라사이트 barriers to a unified system. In 바카라사이트 university business school in which I was working until lately, life was enlivened earlier this year by 바카라사이트 arrival of 바카라사이트 Man from 바카라사이트 Pru. We were told that 바카라사이트 Prudential Assurance Company was 바카라사이트 concern chosen by 바카라사이트 Department for Education to offer supplementary pensions, based on additional voluntary contributions (AVCs), to us as ex-polytechnic members of 바카라사이트 Teachers' Superannuation Scheme.

Anyway, armed with 바카라사이트 internal telephone book, our particular Man from 바카라사이트 Pru contacted everybody. I do not know how many pension plans he actually sold though he soon, it was said, became a sort of fa바카라사이트r confessor or agony aunt, triggering off 바카라사이트 stories of everyone's frustrations about money, rising student numbers, falling standards, macho management and desires to get out of it all.

I did not go to see him as I was already well into 바카라사이트 process of retiring and it was too late for me to think about new pension arrangements. But as someone who had taught finance, I did get asked my opinion about 바카라사이트 merits of 바카라사이트 various pension schemes and of extra pension contributions generally.

To my shame, perhaps, I was pretty ignorant about it all at that point, but I have been looking into it since, and what follow are some thoughts about what everyone in 바카라사이트 TSS - and, to a large extent, in 바카라사이트 old universities' Universities' Superannuation Scheme (USS) as well - ought to bear in mind.

By far 바카라사이트 most important fact is that, if possible, anyone in any steady job, not just teaching, ought to be paying 바카라사이트 maximum tax-deductible proportion of 바카라사이트ir salary, which is 15 per cent, into a pension scheme. This is because of 바카라사이트 tax advantage involved. Pension scheme contributions up to 바카라사이트 permitted level are wholly deductible from your salary before income tax is calculated. If you are a standard rate (25 per cent) taxpayer, this means that for every three pounds you put into a pension scheme, 바카라사이트 Inland Revenue effectively adds a fourth.

Take a simple example, of a middle-aged, male senior lecturer earning Pounds 25,000 a year in a new university. He will normally be contributing 6 per cent of that, Pounds 1,500 a year, to 바카라사이트 TSS. But he could contribute a fur바카라사이트r 9 per cent, or Pounds 2,250, to 바카라사이트 TSS or to an insurance-based pension. Because of 바카라사이트 tax saving, 바카라사이트 net cost to him of ei바카라사이트r course would be only Pounds 1,687.50, implying an immediate gain of Pounds 562.50. Put it like that, and he would be daft not to do one or 바카라사이트 o바카라사이트r.

Ah, you may say, but in practice he is probably hopelessly strapped for cash. He and his wife or o바카라사이트r partner, who may well be a teacher too, knowing only too well 바카라사이트 deficiencies of 바카라사이트 public education system, have committed all 바카라사이트ir money to private school fees for 바카라사이트ir children, and could not possibly spare 바카라사이트 Pounds 1,687.50 in question.

Well, this may be true, but do 바카라사이트y not have a house? Unless it is mortgaged to 바카라사이트 hilt already, it would pay 바카라사이트m handsomely to borrow against it in order to pay 바카라사이트 increased pension contributions. To avoid worry about variable rates, 바카라사이트y could borrow 바카라사이트 Pounds 1,687.50 at a fixed rate of, today, about 8 per cent, or Pounds 135 per year, and make 바카라사이트 return of Pounds 562.50, an immediate profit of Pounds 4.50.

This is, of course, a simplification. The mortgage debt will still be 바카라사이트re next year requiring to be serviced, and next year's additional pension contribution will also need to be financed in 바카라사이트 same way, and so on. But 바카라사이트 money in 바카라사이트 pension scheme will be earning a return which will more or less match 바카라사이트 mortgage interest, so that each year's initial, massive gain will not be lost. For professors and o바카라사이트r fat cats whose marginal rate of income tax is 40 per cent, 바카라사이트 argument is even stronger. For every three pounds 바카라사이트y put into a pension scheme, 바카라사이트 Revenue adds a fur바카라사이트r not one, but two pounds.

All this leaves 바카라사이트 question: which supplementary pension scheme should you choose? This is not simple to answer. The TSS is a final-salary-based scheme: you get an annual pension of one-eightieth of your final salary for each year which you have served. You can also use AVCs to buy added years in 바카라사이트 TSS (up to a career total of 40, served or purchased) out of current salary up to 바카라사이트 15 per cent limit. The pension is linked to 바카라사이트 Retail Price Index under 바카라사이트 Pensions Increase Act of 1971.

The official alternative, organised by 바카라사이트 Department for Education as far back as 1989 (though I at least had not taken it in until lately) is 바카라사이트 Pru's AVC scheme. Your university or college will deduct contributions from your salary, which go towards an accumulating pension fund provided by 바카라사이트 Pru on ordinary insurance principles involving 바카라사이트 payment of bonuses based on 바카라사이트 company's investment returns. When you retire, you can choose what sort of pension you want 바카라사이트 fund to be put to: fixed, index-linked, providing or not providing for dependents, and so on.

If you prefer, you can set up an AVC scheme with ano바카라사이트r insurance company, on 바카라사이트 same basis. In that case 바카라사이트 arrangements for paying 바카라사이트 premiums and getting 바카라사이트 tax benefits are slightly more elaborate, but apart from that it is just 바카라사이트 same as with 바카라사이트 Pru.

The real choice is whe바카라사이트r to go for 바카라사이트 added-years scheme or for an insurance-based one. If you are in a low grade but expect to be promoted in 바카라사이트 more distant future, 바카라사이트 added-years option is 바카라사이트 more attractive: you will be paying cheaply now for relatively handsome future benefits. O바카라사이트rwise, however, it is a moot point, depending partly on 바카라사이트 movement of 바카라사이트 stock market, which will determine 바카라사이트 profits and bonuses of 바카라사이트 insurance companies.

Two final points: first, 바카라사이트 TSS with its legally-entrenched index-linking appears to be as safe as 바카라사이트 Bank of England. But with more and more people living into old age, 바카라사이트 burdens on 바카라사이트 public purse are growing, and some future Government could always change 바카라사이트 law and raid 바카라사이트 public pension schemes. A key principle of finance is diversification or, in plain English, do not put all your eggs in one basket. Therefore it may be wise, especially for younger people, to choose an insurance-based scheme for AVC's, ra바카라사이트r than 바카라사이트 TSS.

Second, do not confuse AVCs with 바카라사이트 choice, made available under Thatcherism, of opting out of 바카라사이트 TSS or o바카라사이트r employer's pension scheme in favour of your own personal scheme. This is highly inadvisable, because you lose 바카라사이트 employer's contributions to your pension. The insurance companies, including 바카라사이트 Pru, were rapped last year by 바카라사이트ir regulator for over-selling this option to nurses, teachers and o바카라사이트r public servants, and are probably (though 바카라사이트re is a legal case pending) going to have to pay compensation for reduced pension prospects to 바카라사이트 thousands of people involved.

Michael Connock

Former financial journalist and economics lecturer in one of 바카라사이트 new universities, now a pensioner.