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    • Moneyer
    • By Moneyer 16th Oct 16, 10:39 AM
    • 106Posts
    • 69Thanks
    Moneyer
    Pension for wife after my death?
    • #1
    • 16th Oct 16, 10:39 AM
    Pension for wife after my death? 16th Oct 16 at 10:39 AM
    I'm 40ish, married and lucky enough to be in a DB scheme which together with the state pension should hopefully provide a decent index-linked income for both of us. However, if I die before my wife (likely as she's younger) she'll receive only half my pension at the time, and that not index-linked, and she's also unlikely to qualify for a state pension.

    For tax reasons now would be a good time for me to make some extra pension contributions, and my priority is to make sure she is better provided for after my death, esp. if she outlives me by long enough for inflation to eat away the spouse part of my DB pension.

    Any suggestions for the most efficient and reliable way to achieve this?
Page 2
    • OldBeanz
    • By OldBeanz 17th Oct 16, 12:43 PM
    • 540 Posts
    • 381 Thanks
    OldBeanz
    One of the features of the site is that many cannot resist the urge to query what people are trying to do (often for very good reason) which is not often appreciated, however, it usually in an effort to help.
    As you have savings and in your position I would be doing this although this is not advice.
    Having a life insurance policy which would cover my death in any perceived gap.
    Ensuring I paid enough into my pension to ensure I was not a higher rate tax payer using my savings to make up any spending shortfall. A Personal Pension would give you more flexibility when you want to draw funds. You will have to ensure you do not go over any Government limits on contributions or size of pension pot.
    Ensure that your wife was investing all her wages into a pension. In your case that would be £2880 but as she will be able to have an income of circa £16k from a pension it may be you have scope to add to this if she ever took paid employment. She could be taking this income from 55 at present.
    Look at how many years NI contributions she has - which should be over 10 and decide whether it will be worth making more contributions.
    You could always divorce her and the pensions could be divided in two, the re-marry - good luck with that one
    • Moneyer
    • By Moneyer 17th Oct 16, 1:18 PM
    • 106 Posts
    • 69 Thanks
    Moneyer
    Does USS still offer "allocation" whereby you can choose to sacrifice some of your pension so that her widow's pension is bigger? It may depend on the different sections of the scheme; is part of your pension going to be from the Final Salary section?
    Originally posted by kidmugsy
    Thanks for the tip - I didn't know about this possibility at all. Turns out it does still exist but the member has to be 55 or older to make an allocation. I'm reluctant to leave things until that late, in case the rules change, but I'll certainly think about if its still available when I get there!
    • atush
    • By atush 17th Oct 16, 2:22 PM
    • 15,284 Posts
    • 9,163 Thanks
    atush
    Well then, S&S isas and a private pension for her.

    but her salary, however small would be invaluable towards other costs you havent been thinking about from helping your kids onto the property ladder, to paying for their university education (so they dont graduate with 60K of debt each).
    • Moneyer
    • By Moneyer 17th Oct 16, 2:37 PM
    • 106 Posts
    • 69 Thanks
    Moneyer
    but her salary, however small would be invaluable towards other costs you havent been thinking about from helping your kids onto the property ladder, to paying for their university education (so they dont graduate with 60K of debt each).
    Originally posted by atush
    Thanks, but what makes you think we haven't thought about and already provided for these things? (As it happens it's because we're now broadly satisfied with the investments we've made to give them a start in life that we're turning to think about our own retirement....)
    • xylophone
    • By xylophone 17th Oct 16, 4:18 PM
    • 19,168 Posts
    • 10,881 Thanks
    xylophone
    Presumably you have now confirmed with the administrator the position re index linking of a widow's pension.

    You and your wife are obtaining up to date state pension statements.

    You can then deal with the question of any voluntary NI for previous years and consider the position for the future if she chooses not to take paid employment.

    You can consider a personal pension for your wife.

    You can consider additional pension contributions for yourself to reduce your adjusted net income for CB purposes and to obtain additional tax relief.

    You might choose to make such additional contributions to a personal pension (SIPP or other) and regard this as extra provision for your wife should you shuffle off this mortal coil before she does.

    It is clear that you are in a position to make financial provision for your wife and children - under such circumstances it seems to me perfectly logical that she makes a choice regarding employment that best suits her/you/your family circumstances.
    • atush
    • By atush 17th Oct 16, 10:21 PM
    • 15,284 Posts
    • 9,163 Thanks
    atush
    Thanks, but what makes you think we haven't thought about and already provided for these things? (As it happens it's because we're now broadly satisfied with the investments we've made to give them a start in life that we're turning to think about our own retirement....)
    Originally posted by Moneyer
    Because A- you didnt mention providing for them and

    B- Pension planning cannot be done in isolation- it is one facet of overall finances. And if people here dont know, they cant give their best opinions

    So S&S isas in both your names (100% inheritble by a spouse) and a private pension for her. With life insurance if you dont have any ( i assume you do).
    Last edited by atush; 17-10-2016 at 10:23 PM.
    • Triumph13
    • By Triumph13 18th Oct 16, 8:21 AM
    • 714 Posts
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    Triumph13
    I have to say, I think Moneyer gets the 'Grace under Pressure' prize for maintaining his equanimity in the face of a barrage of 'challenges' to his family's chosen direction. People have frequently gone completely librarian by now under such provocation. Well done sir!
    • atush
    • By atush 18th Oct 16, 11:16 AM
    • 15,284 Posts
    • 9,163 Thanks
    atush
    Provocation? Hardly.

    If you throw out quips w/o explanation, and dont tell the actual facts behind the case, you get people questioning you? AS some of it makes no sense on first (or even second) look?

    Alternate opinions dont have to be taken, but not to give them isnt helpful.
    • Moneyer
    • By Moneyer 20th Oct 16, 10:04 AM
    • 106 Posts
    • 69 Thanks
    Moneyer
    Thanks to everyone who's commented: you've been really helpful. I think putting everything together our next actions are:

    (1) Get written clarification from USS of whether the spouse pension following death after retirement is index linked.

    (2) Get a state pension and national insurance statement for her, and buy whatever stamps are necessary/possible to maximise her state pension.

    (3) Set up and pay into a private pension (in my name) with the intention of leaving the pot untouched until one of us dies. Assuming I go first, she inherits it and can either buy an annuity or draw it down to supplement her income.

    In (3) the reason for putting the pension in my name is of course the effective 64% tax relief. I guess I have to be a bit wary of the lifetime allowance, given the potential for 40+ years growth and the combination with my DB scheme, but I guess even the penalty for exceeding this would be less than the tax saving. Apart from this, have I missed any pitfalls of accumulating the pension in my name rather than hers?
    • Triumph13
    • By Triumph13 20th Oct 16, 6:22 PM
    • 714 Posts
    • 656 Thanks
    Triumph13
    Assuming rules stay the same (big assumption) then even if you / your wife were a 40% taxpayer in retirement and the DC was over the LTA then it would still be no worse doing it in your name than hers:
    • Your name £36 =>£100 at 64% effective relief, £100 => £75 after LTA charge, £75 => £45 after 40% tax
    • Her name £36 => £45 which she takes out tax free after pension access age and before state pension age.
    If you aren't going to be over LTA then do check if USS AVCs still allow you to link them to the DB for taking the tax free lump sum. If they do then that's likely to be much more tax efficient than a separate private pension.
    • atush
    • By atush 21st Oct 16, 7:38 PM
    • 15,284 Posts
    • 9,163 Thanks
    atush
    In (3) the reason for putting the pension in my name is of course the effective 64% tax relief. I guess I have to be a bit wary of the lifetime allowance, given the potential for 40+ years growth and the combination with my DB scheme, but I guess even the penalty for exceeding this would be less than the tax saving. Apart from this, have I missed any pitfalls of accumulating the pension in my name rather than hers?
    The only pitfall here is, not using her PA in full in retirement (esp if you both live long together). You can currently use 1K of your spouse's PA. Maybe in future you could use more.

    But if you exhaust your 40% threshold, any extra money could be set aside for her in a pension. And you could do it after you stop work from savings or your pension income? This money in a pot in her name, could mop up her excess PA.
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