Can you pay into someone else’s pension?

rjs34id

Hello All,

I am looking to set-up a pension for my partner. I am a higher-rate tax payer while my partner is a lower-rate tax payer. Can I set-up and pay into a pension for my partner thus getting the 40% tax relief on the contributions rather than just 20% if she was to make the contributions from her own income? I am already paying into a non-contributory company pension in my own name? Would getting married effect this setup assuming it is possible in the first place?

Linton

Not possible I am afraid. You only get tax relief on your own pension. Being married makes no difference.

Rob_192

Don't think so. Also bear in mind your wife/partner can only pay in a sum equal to her annual income or £3600 if she is a non tax payer.

Cook_County

You can each pay up to your annual allowance plus deemed carryforwards from the past tax years or your income (whichever is the lower). It is probably most tax efficient for you to increase your own contributions.

rjs34id

OK - the reason I thought it might be possible is because I remember hearing on an episode on MoneyBox Live the advice to a grandparent to setup a pension for their grandchild as tax efficient way of saving for their grandchild’s future. I was hoping whatever made this possible could be extended to anyone.

So if I cannot pay into a pension in my partner’s name to get the 40% tax relief I guess the only option (with the aim of keeping the 40% benefit) would be to set-up another pension in my own name, which is really her pension. But this opens all kinds of problems like how do I ensure she gets that pension if I die, or how can I ensure that she has right to the pension if we were to break up? Can I draw up a contact which says she is eligible to that pension pot if we break up etc?

CLAPTON

rjs34id wrote: »

OK - the reason I thought it might be possible is because I remember hearing on an episode on MoneyBox Live the advice to a grandparent to setup a pension for their grandchild as tax efficient way of saving for their grandchild’s future. I was hoping whatever made this possible could be extended to anyone.

So if I cannot pay into a pension in my partner’s name to get the 40% tax relief I guess the only option (with the aim of keeping the 40% benefit) would be to set-up another pension in my own name, which is really her pension. But this opens all kinds of problems like how do I ensure she gets that pension if I die, or how can I ensure that she has right to the pension if we were to break up? Can I draw up a contact which says she is eligible to that pension pot if we break up etc?

the money box program was really saying... give the grandchildren the money and invest in a pension so only 20% tax free even if the grandparents were 40% payers

stop letting the tax tail wag the dog; just accept that you only get 20% tax rebate rather than 20%
that's life

Loughton_Monkey

As far as I know, it is 100% necessary for the pension provider to ensure that the money is coming from the pensioner, and must treat it purely upon the tax status of the pensioner (policy holder).

Giving money to wife/partner for her to pay into her own pension is fine.

I have less knowledge on the specific case of a money purchase pension pot when a couple splits up before crystalisation - but my understanding is that this would be dealt with by 'normal' methods the same as all the other 'joint' assets.....

But once you both succesfully reach the time to crystallise the pension, then a joint life pension would normally be a good solution to ensure that it pays out right up until last death.

As far as I know, paying extra into your own pension (or setting up another one) is the best and only way of accruing 40% tax relief. At higher rate tax, pension contributions are just about the most efficient investments you can make. If you don't 'need' your salary above the basic rate tax band, and have sufficient 'emergency' savings, then throwing every penny of it into a pension is well worth considering.

System

Could you employ her, and then make make unlimited employer contributions up to the current maximum of £50,000 pa. These could be offset against corporation tax.

rjs34id

From Direct.gov.uk:

Tax relief if you put money into someone else's pension scheme

You can put money into someone else's personal pension - like your husband, wife, civil partner, child or grandchild's. They'll get tax relief added to it at the basic rate, but this won't affect your own tax bill. If they've got no income, you can pay in up to £2,880 a year - which becomes £3,600 with tax relief.