To DB or not to be – that is the pension question

I have been contemplating this over the past few days after chatting with a financial adviser who has been approached by people clutching offers of up to 35 times their annual pension.

I find it is often helpful to bring these things closer to home, so I have been pondering whether I would give up my Daily Mail final salary pension if offered a 35 times transfer value.

I have been pondering whether I would give up my Daily Mail final salary pension if offered a 35 times transfer value

The biggest plus point (at least from my stepsons’ point of view) is probably inheritance. I could pass the money on to my wife intact and to the next generation, although in the latter case there would potentially be a whacking great tax charge. So there may be a better outcome for my wife and stepsons than hanging on to my defined benefit pension.

But the sting is that the extra money would send me hurtling towards a taxation car crash. Losing 55 per cent on part of that extra pension would certainly take the shine off it.

Then there is inflation to consider. With prices beginning to tick up again the guaranteed index-linking on the company pension looks attractive. But any guarantee is only as strong as the company underwriting it. If at some stage the Pension Protection Fund were called on, my pension would shrink and the guarantees shrivel.

Then of course there is my health to consider. The shorter my life expectancy, the more attractive the transfer value would look. I do not smoke but I am partial to a nice pint, or glass of wine, or cocktail or whisky.

There are also my retirement ambitions to consider and my overall financial position. For others there may be the interaction with the benefits system.

Of course, no such offer of an enhanced transfer value has come my way, so there is, for now, no decision to make.

Having spent some time considering this, it becomes clear why specialist financial advisers will have their hands full helping clients with very tricky decisions as these offers become more widespread.

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Mind the gap with car crash insurance

I bought a car a couple of weeks ago. It’s an Audi A3 Cabriolet. My sister has kindly labelled it my mid-life crisis car.

What amazed me in this transaction was the array of insurance now sold alongside cars.

Hugely lucrative gap insurance has been flogged for years. The standard price at car dealerships appears to be £399, but the same thing can be bought online for around £150 – and the payout rate is just 10 per cent.

But now there is insurance to cover upholstery damage, tyres, lost keys, paintwork damage and squashed flies on the windscreen (OK, I am making the last one up). And this is on a used car.

It is all such a marvellous money-making enterprise that I am not surprised that the Financial Conduct Authority stepped in a couple of years ago and insisted that gap insurance could not be sold alongside the car but only after a short cooling-off period.

The dealership I used played by the rules. Not so the one my stepson used just before Christmas. A couple of these, including gap, had been craftily inserted onto his invoice.

He spotted them and had them removed. But it does make me wonder how many dealerships are either unaware of the rules, or just do not bother abiding by them.

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Stop attacking self-employed with tax changes

Happy New Tax Year. From today you’ll be able to earn £45,000 a year before paying a higher rate of tax – unless of course you live in Scotland, in which case  you are still saddled with the lower £43,000 limit or you earn more than £100,000 a year.

This may also be the last year when those of you who run smaller businesses or are self-employed will be able to file annually. If HMRC and the government get their way you’ll be filing quarterly digital updates from next April. 

This will put pressure on the businesses and their accountants, not to mention the increased costs (accountants do not work for nothing).

An online petition against the change collected 114,504 signatures triggering a Parliamentary debate. The government claimed in response that digital tax would not mean the equivalent of quarterly returns. But the reality will be more administration and headaches as the government continues its wrong-headed attack on entrepreneurs and the self-employed.

Tony Hazell writes for the Daily Mail's Money Mail section