Salary sacrifice pension

mysk_girl

Is my husband allowed to salary sacrifice into a pension in my name? This would only happen if I stop working after maternity leave and we want to maintain a pension in my name. Don't know if there is an issue as I wouldn't be a taxpayer at that point? He is a director of the business if that has any bearing on the situation. We would be looking at about £3500 pa contributions.

molerat

No he cannot. Only you or your employer can make payments in your name to gain the tax advantages.

rpc

He can't, but you can still receive basic rate tax relief on contributions up to £3600 gross even if you are not paying tax yourself. Free money from the tax man!

mysk_girl

OK, thanks for that. Didn't think so, but worth asking!

mysk_girl

So does that mean to get a gross contribution of £3500 pa into my pension, we could have to contribute 3500/1.2 = 2915 pa? That makes things a bit easier, I had assumed that as I wouldn't be paying tax, I couldn't get the tax relief.

bilbo51

mysk_girl wrote: »

So does that mean to get a gross contribution of £3500 pa into my pension, we could have to contribute 3500/1.2 = 2915 pa? That makes things a bit easier, I had assumed that as I wouldn't be paying tax, I couldn't get the tax relief.

Almost right. See http://www.hmrc.gov.uk/incometax/relief-pension.htm#1

What happens if you don't pay tax?
If you don't pay tax you can still pay into a personal pension scheme and benefit from basic rate tax relief (20 per cent) on the first £2,880 a year you put in. In practice this means that if you pay £2,880 the government will top up your contribution to make it £3,600. There is no tax relief for contributions above this amount.

mysk_girl

Thanks, I currently have 2 stakeholder pensions, one from current employer and one from previous employer that I carried on contributing to from my own bank account.

The plan (if I don't go back, baby due next week so I have a year to decide) would be to merge these and then have my husband make contributions. Would I then get tax relief automatically or would I need to do a tax return?

Do I need IFA lined up to advise on the best way to merge the pensions, one is with Aviva and one is with <whoever has the multi coloured umbrella logo - pregnancy brain here!>. The non-Aviva one will have contributions going in until I officially leave work, does it then take a long time to merge and restart contributions?

dunstonh

Do I need IFA lined up to advise on the best way to merge the pensions, one is with Aviva and one is with <whoever has the multi coloured umbrella logo - pregnancy brain here!>.

L&G is the second one (legal & general).

You dont need an IFA if you can do the analysis, review of alternatives and investments yourself. If you cant or dont want to then you use an IFA.

rpc

If your husband makes the contributions, there isn't any tax relief.

What would happen is that your husband gives you the money and you then make the contributions yourself. That's effectively what is happening at the moment with my wife's stakeholder as she is on mat leave.

mysk_girl

rpc wrote: »

If your husband makes the contributions, there isn't any tax relief.

What would happen is that your husband gives you the money and you then make the contributions yourself. That's effectively what is happening at the moment with my wife's stakeholder as she is on mat leave.

Isn't your wife's employer continuing to make contributions? AFAIK they are obliged to, mine are continuing through SMP and I can assure you they wouldn't if it company had any say in the matter! The money will come from a joint account into my pension, I assume that will be OK for the taxman?

I will need an IFA! Not sure I would be confident to do those calcs myself, will find someone local to advise.

Thanks for all your help, just more sums to work out if I can stay at home. This is baby no.3 and with childcare and a long commute it is looking unlikely that it is economic for me to return, at least to my current job and working hours. But a year is a long time, who knows what might happen :-) the only certain thing is that I will not be pregnant for ever, although it feels like it at the moment!

mysk_girl

How much would an IFA typically charge for that kind of advice? The Aviva one is a stakeholder, the L&G one is a group personal pension (assume it can't continue as a group pension when I leave as I won't be part of the group anymore!) and we know how much we can afford to put in.