Pension decisions?

Glyn777

I currently contribute 5% salary into an Legal and General stake holder pension scheme, my employer contributes 10% for me. However my wife who is not working no longer contributes to her stakeholder pension. The question is should we pay into hers or pay more into mine??? Whilst she was working we contributed £100/month. I am worried that her fund will be insignificant when we retire. We are both 33, but I like to plan ahead.

Debt_Free_Chick

I know this is a tough question, but what are the chances you will still be together when you retire?

If you are relying on "joint pension income" for retirement, then either one or both of you could find you don't have enough, if you're single when you retire.

My own view is that you should each plan and save for retirement via your own plans and if you retire together, you'll have two pensions to rely on.

But you need to bear in mind that if you pay into your wife's pension now, that money is gone - it will be in her pension and you'll not be able to make a claim on it later.

If you're prepared to write off any money you pay into her pension, then that's the better option - especially for her.

Assuming the charges are the same in each stakeholder, it doesn't matter - financially - which one you pay in to. The two charges separately would be the same as the charge that would apply in one plan (but this assumes the charges are the same).

Does your wife plan to work in the future? If so, then perhaps view this period of time as a temporary holiday in her payments, which she can make up later - but don't leave it too long.

Your contribution rate is great for your age - but watch the contributions in the future, especially if you change job.

Hang around for other views.

Robert_Sterling_3

What a sad post from Debt Free Chick.
I have never considered the fact that if I give somethig to my wife then the money is gone. On the contrary I can't give her any money as all the money has always been in joint accounts with only one signature required except when for tax avoidance purposes some money has been in her name only.

dunstonh

In retirement (65 onwards rising to 68 in the coming decades), you can each earn 10k in todays terms without paying tax.

Lets say your retirement planning brings in 20k a year. If its all in your name, you will have 10k tax free and the other 10k will be taxable. If its split equally, then both of you earn 10k tax free.

That is a saving of £2000 a year if you do it right or a cost of £2000 a year if you get it wrong. All down to a quick application and making sure the direct debit goes to the right person.

chesky369

Debt Free Chick is absolutely right to state the fact that all women should make their own arrangements for retirement, regardless of their marital state at the time. We none of us know what the future holds as many wives have discovered to their cost later on in life.

Robert_Sterling_3

So your answer to the original poster is YES put it into her pension. Whereas I would say put it where it is most cost effective. In the event of a split such matters can be part of the negtiations.

EdInvestor

It would be sensible to compare your separate state pensions, especially if you are looking at the tax issue. A state pension can easily eat up the whole allowance. Your wife should be receiving home responsibilities credits towards the basic pension while looking after children.You will both need 30 years NI for the full state pension and then there is S2P on top, the latter could mean you are further "ahead" in provision than you thought.

Get forecasts here: www.thepensionservice.gov.uk

Debt_Free_Chick

Robert_Sterling wrote: »

What a sad post from Debt Free Chick.
I have never considered the fact that if I give somethig to my wife then the money is gone. On the contrary I can't give her any money as all the money has always been in joint accounts with only one signature required except when for tax avoidance purposes some money has been in her name only.

The difficulty with a pension is that is in one name only and cannot be transferred to another person.

In the event of divorce, yes, the value of pensions is taken into account and pensions can be split so the OP could get a share of his wife's pension on divorce - and vice-versa; she could get a share of his.

I'm trying to be practical and unemotional but I agree - it's a sad thing to have to contemplate. It's even worse if you actually have to go through it, not having made any contingency