Readers lives

Life insurance ... tax allowances ... the future value of pension plans.

Each week we answer your letters on everyday financial concerns

I recently took out a new mortgage but was unable to get life insurance without any explanation after a doctor's report. Worse still, I was told my name had been put on a central register to prevent me applying to other companies. Surely I am entitled to approach as many companies as I like? SB, York

Yes, you can make further applications. Although one company has turned you down, it may still be possible to get cover elsewhere. But the premium may be increased, depending on your health problems and the life company's underwriting criteria. The best bet is to try an insurance broker, such as Term Direct (0171-588 9797), rather than approach individual life companies yourself.

Your name has been added to a central register run by life insurers, but this does not mean you are blacklisted. The register gives basic details of applicants who have been declined life insurance. Other companies to which you apply can find out if you have previously been turned down.

The register does not include any medical details or the reason a company rejected you. But if your name is on it, any insurer to which you subsequently apply will almost certainly want a doctor's report. In addition, it might contact the company that rejected you to get details of the information you gave them. When you sign a proposal form for life insurance, you usually give authority for other life insurers to disclose information. The aim is to prevent people giving different, misleading or incomplete information about themselves in order to get cover.

Under the data protection rules, you have a right to find out what details the registry has on you. Write to the Association of British Insurers, 51 Gresham Street, London, EC2V 7HQ.

I've worked out my tax bill for last year in a different way from my tax office and get a different answer. The problem centres on the married couple's allowance. The tax office says it is worked out as a tax credit, not an allowance. Is this right?

AS, Manchester

I think your tax office is right. The basic allowance was worth pounds 1,720 last year (pounds 1,790 this year) but you only save 15 per cent tax on this. So the allowance is worth the same in tax savings - pounds 268.50 - whatever your highest rate of tax.

You will see from your income tax PAYE Coding Notice that on one side of the form you are given the allowance, then on the other side there will be an "allowance restriction". This ensures the allowance is worth the same in cash terms whatever rate of tax you pay. The allowance restriction will vary to reflect your tax band.

There appears to be a problem with the allowance restriction you were given. It seems your tax office gave you the wrong allowance restriction but subsequently amended your tax bill at the end of the tax year. Your personalised restriction should have been denoted by the number 854, for pounds 854. By deducting pounds 854 from your overall tax allowances, you would have ended up with the same figure for your tax bill as your tax office.

Last year, you had the higher married couple's allowance of pounds 2,995 for people aged 65. Of that, pounds 860 was allocated to your wife, leaving you with pounds 2,135. You yourself are a basic-rate taxpayer. Last year's basic rate of tax was 25p. So because the allowance is only worth 15p in the pound, it was restricted to recoup 10p from every pounds 1. So the total tax to be clawed back from your allowance was pounds 213.50 (10 per cent of pounds 2,135).

As a basic-rate taxpayer, each pound by which your allowances were restricted last year brought in 25p tax. So you divide 213.5 by 0.25 to get 854 - your correct allowance restriction.

If this still seems confusing, talk to your tax office or an accountant.

Can you assist me through the pensions maze? I understand that inflation will reduce the spending power of figures quoted for pensions when I retire in the future. I want to do "what if" calculations to find out what will happen if inflation varies, but the only calculators that do the job seem to cost about pounds 80.

IR, Manchester

Doing some sums on inflation is no bad thing. It is easy to be beguiled by telephone number figures of the future value of a pension plan or the pension it will produce.

Jonquil Lowe, author of The Which? Guide to Pensions, offers this formula to take account of inflation:

pounds b = pounds a x (1+r)n

where 'a' is the pension you would want if you retired today, 'b' is the sum you will need in the future to have that spending power, 'r' is annual inflation expressed as a percentage (so 5 per cent is 0.05), and 'n' is the number of years to retirement.

For example, say you want a pension worth pounds 10,000 a year at today's prices in 15 years. You assume inflation is 5 per cent a year. The sum is pounds 10,000 x (1+ 0.05)15 or pounds 10,000 multiplied by 2.0789, which equals pounds 20,789. That's the amount of money you need in 15 years' time.

If you expect a certain pension figure in the future and want to know what it would be worth in today's terms, the formula is:

pounds a = pounds b (1+r)n

q Write to Steve Lodge, personal finance editor, Readers' Lives, Independent on Sunday, 1 Canada Square, Canary Wharf, London E14 5DL, and include a telephone number.

Do not enclose SAEs or documents that you wish to be returned. We cannot give personal replies and cannot guarantee to answer every letter sent to Readers' Lives. We accept no legal responsibility for advice.