How to work out pension relief vs tax pay?

leaphaze

Thanks for that - very helpful!

leaphaze

leaphaze wrote:

I have 10k which I was intending to use to increase my company pension (over 10 months). However, my wife suggested I setup a stakeholder pension for her, thus spliting the tax payable when we come to draw on our pensions.

So having calculated the monthly 'pensionable' amount; 78% of this 'pensionable' amount can be paid by me and the government will add 22%. What I don't understand is the mechanics of getting that 22% into the pension.

So, for example, my wife starts a stakeholder pension with L&G paying in £325 per month. The government should be adding £91.67 per month. How does that happen?

Does L&G get the money directly?
Do we need to contact anyone at HMRC?

Any thoughts on this would be greatly appreciated.

isasmurf

For a Personal or Stakeholder Pension, you make a contribution into the pension. The pension manager will then automatically claim basic rate relief for every individual regardless of their taxpaying status from HMRC and pay it into your pension fund. So there is nothing for you to do.

leaphaze

Thanks for that!

david78

Thank goodness we don't have to do anything to get the tax relief!

(apart from us 40% tax payers who only get 22% automatically and have the claim the other 18% manually)

Its worth noting that the above trick of paying into a pension for a non tax paying spouse also works for children.

stphnstevey

You can't get to the money till you retire though - bear this in mind, it is Long term investing.