Workers offered rewards to switch out of their pension fund must consider the financial implications carefully, the Pensions Regulator has warned.
As a swath of final salary schemes water down their terms or close to existing members for cost reasons, the regulator has called on companies involved to make sure staff understand the implications of a transfer out.
In a statement last week, it expressed concern at cash inducements or "enhanced transfer values" offered to staff to leave final salary schemes. The regulator is worried that staff may take up these offers without realising how much they may be giving up in potential retirement income.
"While we recognise that employers may not break any laws when they offer such inducements, we're concerned that some transfers are being proposed to avoid an employer's full pension liability," warned Tony Hobman, chief executive of the Pensions Regulator.
Trustees of pension schemes, in particular, he added, had a duty to make sure staff understood the consequences. And he stressed that anybody considering opting out of a final salary scheme should first take independent financial advice.
A separate survey by the fund manager Fidelity last week warned that, in contrast to final salary schemes, "defined contribution" pensions could leave many employees with less than they needed in retirement.
In these schemes, workers' money is invested to build a pot of cash to buy an income for life. Companies tend to contribute far less to defined contribution than to final salary schemes, Fidelity said.
Meanwhile, a European Court ruling on Thursday may give hope to thousands of pensioners who were deprived of their final salary pensions when their employers went bust (see Comment, page 22).
A judge ruled that, under the EU Insolvency Directive, the UK Government's pension protection scheme was "inadequate". However, the court found that the directive did not oblige governments to fund "the rights to old age benefits".
The matter will now go to the High Court in the UK.
Housing: 6ft by 12ft flat on sale for £170,000
A basement studio with a living area the size of a snooker table has become the smallest flat on sale in the UK - with a staggering £170,000 price tag.
The Chelsea flat in fashionable Cadogan Place measures just 6ft by 12ft, with a cupboard for a bathroom, and will need an estimated £25,000 spent on rewiring and redecoration.
The flat is being marketed as a bolt-hole for a housekeeper or au pair, and estate agent Lane Fox said it had received several expressions of interest. But there could be problems for potential buyers, warned James Cotton of broker London & Country. A lender will offer a mortgage only if it is confident that in the worst case, such as the buyer defaulting or a housing crash, it is still likely to get its money back.
"[The property] sounds virtually unmortgageable," said Mr Cotton. "It may be cheap [for the area] but not easy to get a mortgage on."
Minuscule it may be but the flat is not Britain's tiniest. That distinction belongs to a 62 sq ft home in nearby Notting Hill in west London.
Tax: 10 million homes at risk from IHT
More than 40 per cent of UK households now fall into a potential inheritance tax (IHT) trap, according to a new study.
Some 10 million homeowners have an estate worth in excess of £285,000 - the threshold at which IHT is payable at 40 per cent - research from Scottish Widows has found. This is 7 per cent more than last year, reflecting another year of growth in the UK property market.
But families are taking action to reduce their tax liability, the report suggested - for example, by giving away lump sums of up to £3,000 a year to friends or relatives.
Where a house is owned by a married couple (or a couple who have formed a civil partnership), "discretionary will" trusts allow the value of the property to be split to make better use of individual IHT allowances.Reuse content