Pension for my wife?

StuTheDon

Hi Guys,

I wonder if you can help? I have a pension through my company where they pay a 7% salary contribution as long as I match it. In addition I make a small AVC on top of that.

My wife does not work as we have a young family, but did previously and has a small amount (circa 1k) in a private pension setup by her employer.

She is worried about the impact to her state pension etc - is there a way we can setup a pension for her even though she is not working? She plans to go back in 2-3 years to employement.

What are the best options? Private pension?

Many thanks!

dunstonh

is there a way we can setup a pension for her even though she is not working?

yes. Anyone can pay into a pension from the day they are born upto age 75.

What are the best options? Private pension?

stakeholder, personal or SIPP. You can rule out SIPP as you wouldnt be asking the question if that was appropriate to you (most expensive option designed for experienced investors).

You should perhaps review your retirement provision as well to get it as balanced as you can as its never good to have to heavy to one partner.

e.g.

Scenario 1 - All in your name, nothing in your wifes and your pension is £25,000 a year. You pay tax on everything over £10k and the amount over £21,900 sees your extra age related personal allowance reduced by £1 for every £2 over (thefore increasing your tax by upto £1000 a year)

Scenerio 2 - same levels of contributions made but split between husband and wife means you get £12,500 each. First £10k each is tax free and only £5,000 is taxable and no reduction in age allowance.

Just with a bit of careful planning you can avoid £2000-£3000 a year more in tax in retirement without it actually costing you any more. Plus, you have to consider death benefits as well. (income tax rate and working/childrens tax credits can create variations as well).