The £1.85trn debt black hole in public pensions

The government is currently sitting on a £1.85trn "hidden debt time bomb", much of which is due to public pensions liabilities, according to free-market think tank the Adam Smith Institute. Out of £1.3trn in liabilities owed by public-sector pension schemes, 93% are currently unfunded meaning that instead of putting money aside today to cover the pensions that these schemes will one day have to pay, the government is "choosing instead to bury their head in the sand safe in the knowledge that they'll not be in office when it's time to cough up the cash".

Other liabilities, including unpaid student loans and RBS shareholdings, are also partly to blame for the huge funding hole. If it wants to deliver on its promises, the Treasury will need to raise £1.85trn to fill this gap via increased taxation and further cuts to public spending, says the Adam Smith Institute. This "hidden" debt can be added to the government's publicised national debt, which brings the total cost up to a staggering £3.45trn. Added together, the real cost of debt to every man, woman and child in the UK is a whopping £53,822 each.

Many high-earning UK workers could be at risk of exceeding the pension lifetime allowance, thanks to a little-known rule governing death-in-service benefits for members of company pension schemes, says Jessica Brown in The Daily Telegraph. Death-in-service benefits pay a lump sum to the families of those who die while working for a company and the amount involved can often be quite substantial. However, many people don't realise that if the worst happened, these benefits would count towards the lifetime allowance (the amount that you can accumulate tax-free in your pension fund, which dropped from £1.25m to £1m on 6 April).

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If this sounds confusing, bear with me. Say you earn £100,000 and have death-in-service benefits equal to four times your salary. If you die while employed, the £400,000 payable to your family under this would count towards your lifetime allowance of £1m. This would leave a remaining tax-free limit of £600,000. If your pension savings exceed this amount, your family would find themselves lumbered with tax on the excess above this amount. Money taken as a lump sum is taxed at 55%, while pension income is taxed at 25% (on top of income tax at the relevant rate).

For anybody who might end up in this situation, there are a few ways to avoid it, if your employer will help. You could ask them to provide death-in-service benefits through an "excepted group life policy" so they don't count towards your allowance. They may also be able to help you fund a stand-alone life insurance policy. Finally, it may be worth paying into a separate life insurance policy to ensure that your family is protected.

The introduction of the brand new lifetime individual savings account (Lisa) last month could be the beginning of the end for the UK's pension regime, according to a survey of pensions advisers by Dentons Pensions Management. Chancellor George Osborne launched the Lisa following opposition to his initial plan to scrap pension tax relief for higher earners. However, most advisers think that far from marking an end to Osborne's pensions tinkering it will be followed by further major changes to the pensions rules during the current parliament.

The majority of advisers (77%) say that the government is merely biding its time before pushing ahead with plans to introduce a single flat rate of tax relief for all savers. Slightly more advisers (80%) think that the annual allowance will face further cuts from its current level of £40,000.