Cash 18-30

A young teacher uncertain of her future asks whether she should take out a stakeholder pension
In the clinic: Abigail Sharp
Age: 29
Occupation: Teacher

The problem

I am seeking advice on a whether or not to take out a stakeholder pension. I have paid into my teacher's pension for six years. I have been working as a supply teacher but have just accepted a full-time position until July. The salary is £24,000. After that, I may take a career break. If I leave teaching, should I buy a stakeholder pension or invest the money some other way? Should I keep the money in the teachers' pension scheme? Also, I own a home but I am thinking of buying a house with my partner, which will be more expensive than mine. I have an Egg savings account for a short-term savings plan - is this any good?

The solutions

The teachers' pension is a final salary scheme; your pension depends on years of service and final salary. This is a valuable benefit for which you will only be making a nominal contribution of 6% of your current salary with the balance being provided by your employer.

With a stakeholder plan the pension which you will receive will depend on how much you save, the growth of the fund and annuity rates at retirement. There is no guarantee of the actual amount that you will receive and no payment by your employer. I strongly advise you to remain within the teachers' plan while you can.

If you have a career break in the future you can arrange a stakeholder plan where you can pay in after tax relief £2,808 a year.

You mention buying a property with your partner. The amount of mortgage will depend on whether you decide to use the equity from your home. You will be able to borrow at least three times your joint salaries, which offers a potential loan of £126,000.
Liz Lyke, Options for Women

The teachers' pension scheme is excellent. It is usually advisable to leave what you have already saved in it.

The rule that allows you to invest up to £3,600 gross a year into a stakeholder pension, without the need for any earnings, means that if you give up work you can continue to invest in a pension. As you are still young, I would suggest that you invest in a unit-linked fund with a company such as Standard Life.

For money required within 12 months it should remain as cash. Your Egg savings account is not the best, but it is competitive. Charcol online currently offers the highest interest rate at 5.00%, via the internet.

You can invest £3,000 a year into a mini cash Isa. The best rate is currently 5.30% with Northern Rock. Once you have enough cash, you could redirect any excess income into unit or investment trusts. Look at funds such as HSBC UK Growth & Income, New Star European and Credit Suisse Transatlantic. As they are linked to the stock market, you should leave them for at least five years.
Anna Bowes, Chase de Vere

Leave your teachers' pension scheme where it is as it is an excellent one. Unlike most others, if you leave service and then resume pensionable employment all your periods of service will be added together, which means the overall pension you get at retirement could be greater.

As for taking out a stakeholder pension, you could continue paying into the teachers' scheme for up to three years instead. Certain conditions apply. For more information call 01325-745-746 or visit

As for saving for a deposit on a new property: make use of your mini cash Isa allowance first. You and your partner can save up to £3,000 each in this tax year and for the next four tax years. When you buy the property, draw up a formal legal agreement as to who gets what should your relationship break down.
Donna Bradshaw, Fiona Price & Partners

· Are you struggling with debt? Or wondering what to do with an unexpected windfall? Or maybe you simply don't understand what to do about Isas and pensions. If you are aged 18 to 30 and would like advice, email

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