Tony HazellMay 3 2017

Pensions, property and probate

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The question of the pension triple-lock has been raised several times in this election campaign.

To many of the 9.2m people aged 65 and over, it is a vital issue. Who votes for a pay cut or, in this case, a lower increase?

I have long been an advocate of the triple-lock, which promises the basic state pension will increase by the consumer prices index, wages inflation or 2.5 per cent.

I felt it was essential to get state pensions back towards the level they were at in the early 1980s when the link to wages inflation was cut by Margaret Thatcher.

Severing that link led to three decades of the state pension losing value in real terms and led to a mess of means-tested pension benefits as Gordon Brown tried to help the worst off while shying away from wholesale reform.

Severing the link between state pensions and earnings led to three decades of the state pension losing value in real terms

So we had pension credit for the poor and then savings credit for those who were relatively poor, but had saved some money. Stacks of civil servants were engaged in trying to persuade people to claim because only a third signed up to pension credit.

The lesson? Cutting the real value of the state pension may appear to save money, but can be costly and counter-productive in the long run.

Now, however, the job of the triple-lock is done. The basic state pension is more or less back to where it was in the early 1980s in terms of real value. And for younger people the new state pension should offer better benefits for lower earners than the old two-tier state system.

That does not mean pension pledges should be abandoned. Going forward, Ros Altmann, the former pensions minister, has suggested a double-lock to prices and wages inflation while abandoning the 2.5 per cent minimum rise pledge.

That seems sensible, though ministers should retain discretion to award larger rises if this seems sensible.

No-one will want to be greeted with the headlines that faced Gordon Brown when pensions increased by just 75p a week in 1999.

Commercial property woes

In my early years as a journalist I worked for a paper called Estates Times, where I gained some insight into the pros and cons of investing in commercial property. Main pro: the income stream. Main con: it is not very flexible and can be hell to dispose of in a downturn.

This background made me extremely wary of funds being heavily pushed in 2010 when specialist property funds looked very expensive. Our warnings to Daily Mail readers got us in trouble with fund managers, but when prices fell and funds locked investors in, our fears proved justified.

Seven years on, a report from the Association of Real Estate Funds suggests that many advisers still do not really understand commercial property funds. This report was triggered by the post-Brexit vote falls, which saw £18bn of property funds effectively locked.

The crux is that advisers are looking for a level of liquidity that undermines the function of the fund. Shares may be for a long time, but property should be for longer. Panic not only crystallises losses, it increases them.

Property has plenty to offer retail investors. But both they and their adviser must understand what they are getting into and, specifically, that this is not an investment with a quick exit.

Bury probate tax

One happy consequence of the General Election is that the probate tax has been shelved. Hopefully it will never again see the light of day. It was a fundamentally wrong-headed idea born out of desperation and delivered by a government desperate to raise money by any clandestine means available.

It would have meant widows paying a death tax on their spouse’s estates for the first time since 1975. It could have forced executors to borrow huge sums before estates could be distributed.

It would have thrown up anomalies such as widows being forced to pay thousands of pounds in probate fees when only relatively small sums were being released from National Savings & Investments, which demands probate on sums as small as £5,000.

The idea was supposedly to raise more money for the Ministry of Justice. But why should the bereaved be soaked to support a department which already has a £9bn budget? No doubt the money would help to pay the pensions of judges who brought successful age discrimination claims when – horror of horrors – they were asked to contribute.

But, whatever the intended use of the money, bereaved people are the wrong target and this appalling plan should not be exhumed after the election.

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