Cheap pension for wife

lvader

My wife is 50, she already quailfies for the full state pension at 66?. Has a small private pension that should pay around £3000 a year at age 60. She also pays into a company scheme where she pays in 6% and the company pays another 10% (just started), unfortunately she only earns about £7000 a year so even if she continues to pay into the scheme for another 10 years it won't amount to much. I was thinking of starting another pension to try to make the most of her tax position with the view of growing a pot of around £50K over the next 10 years. I'm looking to pay in a small monthly amount or around £100 and pay in 1 or 2 lump sums a year (around 2-3k). Investments are likely to be simple trackers and I may want to the option to do a drawdown. She will likely retire at 60, as I will be looking to retire as well age 55.

Any ideas on provider/product?

Thanks.

Loughton_Monkey

My first port of call would be the existing company pension scheme. Presumably you have (or can get) a note of the charges she is paying, and usually these are better than you could get as a simple 'retail' customer. Also check that the company scheme has funds that you 'like'. It would be very unusual to find a scheme that did not allow her to pay more than the 6% - although obviously it would not attract any more company contribution.

If you happen to be a higher rate tax payer, then there is some merit in considering putting the excess contributions in your name. It maximises the growth because of the additional tax relief. At the appropriate time, you would put the fund into drawdown, so the income is there for either/both of you, and in the event of your earlier death, she could continue drawdown or perhaps buy an annuity in her own name.

lvader

Thanks LM, the company sceme only has about 3 fund choices, bonds, global equities and a mix of the 2. I'm not sure about the costs but I figured taking the extra 10% was always going to be worth while. The reason for going for something else is that the money comes from me and I want the flexibility to pay in lump sums at quite short notice. I took them 3 months to get her added to the sceme.

I already pay into a company sceheme using up all of the 40% pay that I can use.

atush

Well, if you have taken yourself out of HRTax with contributions for yourself, and want something better/more funds for her in her name, you can invest up to 100% of her salary (deducting what she is paying in ie 94%) into a personal pension for her in her name.

You can even go with a Sipp where you/she choose the insvestments yourself. So look at low cost paltforms incl but not limited to HArgreaves lansdown and Cavendish online (even though they have been sending me PMs which is a bit beyond the pale ;-).

lvader

I was thinking along the lines of a personal pension for my wife but I have no idea which provider provides the best value. I was hoping to pay no more than 0.5% annual charge including the actual fund costs or is that expecting too much? I could do it in an ISA with no added annual management charge so a fund like the HSBC FTSE 100 would only cost 0.25% total.

kidmugsy

"unfortunately she only earns about £7000 a year": if that's before tax, then she presumably isn't a payer of income tax at the moment. The employer pension terms look good but the attractions of further pension contributions seem pretty modest to me: a pension is largely a tax-avoidance device and she has none to avoid. Would you be better off considering ISAs?

gadgetmind

kidmugsy wrote: »

a pension is largely a tax-avoidance device and she has none to avoid.

She pays tax at 0% but can get 20% tax relief on the pension, 25% of the final value of this tax free, and is then more than likely to get most/all pension income tax free.