Need advice on wife's pension

dunstonh

Is getting a SIPP pension for each of us the simplest way?

No. Thats like giving an 18 year old leaner driver a Ferrari. SIPPs are the advanced pension option for people wanitng more advanced investments than those available on stakeholder or personal pensions.

We're both in our late 30s. I probably have, from my previous employments, close to £10,000 of pension provision which is mainly with Scottish Widow and which I'm no longer paying anything into.

You are very behind in your provision. A really rough guide is to aim to have £35k individually in your pension by age 35.

£10,000 will give you an income of around £50pm in retirement. That isnt going to see you far.

jem16

brianq wrote: »

I think we'll lose more than half of Child Benefits for two kids.

So £1752.40 or less depending on how close you are to that £60k. So deduct that from the pension costs and you could be down to £4248 instead of £6k for a £10k pension.

I'd want to talk to a financial adviser of some kind if necessary. What would you recommend?

See an IFA and not an FA from a bank. Use https://www.unbiased.co.uk to find one in your area.

brianq

jem16 wrote: »

So £1752.40 or less depending on how close you are to that £60k. So deduct that from the pension costs and you could be down to £4248 instead of £6k for a £10k pension.

I hope I'm not confused. But is this a suggestion to pay anything above £50,000 into pensions so that we'd not be penalized on Child Benefits?

So if I had an income of £57,000, I'd pay £4,200 after-tax to my (and my wife's) pension?

jem16

brianq wrote: »

I hope I'm not confused. But is this a suggestion to pay anything above £50,000 into pensions so that we'd not be penalized on Child Benefits?

That's exactly what it is. It's your adjusted net income that matters, not your gross salary.

http://www.channel4.com/news/child-benefit-q-a-revenue-sends-out-letters

So if I had an income of £57,000, I'd pay £4,200 after-tax to my (and my wife's) pension?

Correct as far as the £4,200 is concerned but it can only be to your own pension, not your wife's as any payment made to your wife's pension does not reduce your taxable income.

On an income of £57k you stand to lose £998.87 of your Child Benefit. Pay £4200 net into your pension and you get to keep that £998.87 so in reality it's costing you £3201.13 for a £7k pension.

zagfles

jem16 wrote: »

That's exactly what it is. It's your adjusted net income that matters, not your gross salary.

http://www.channel4.com/news/child-benefit-q-a-revenue-sends-out-letters



Correct as far as the £4,200 is concerned but it can only be to your own pension, not your wife's as any payment made to your wife's pension does not reduce your taxable income.

On an income of £57k you stand to lose £998.87 of your Child Benefit. Pay £4200 net into your pension and you get to keep that £998.87 so in reality it's costing you £3201.13 for a £7k pension.

Just to add - you'd actually have to pay in £5600 if it's to a personal pension, and claim the higher rate relief (£1400) via your tax return. The pension provider will claim the basic rate relief.

atush

2 things.

How old is your wife and the the children? what was/is her profession and will she go back to work (even part time) once the youngest is old enough for school/nursery? Who do you work for, and how many others work there?

You may not have a pension today, but you will do in the next few years as it is now Law that your employer provide one (with contributions).

your wife will have contributions for the number of years total you have received CB in the past, and up to age 12 for your youngest child now. you can count these up. then she will have possibly (this was only recently changed so probably doesn't affect her) 3 years contribs from 18-21 and contribs for any years she worked before stopping for her first child. all these you can count up in your head, so will have a rough idea of her SP status before you ask for a forcast.

In addition, do you use your full ISA allowances each year? Do you have savings and investments outside an ISA?

Any savings outside ISAs should be in your wife's name to be tax free as any in your name attract 40% tax and she doens't pay tax so can register for Gross interest.

If you cannot afford to put your over 50K income into a pension, it may mean you cannot afford to have a non working wife, and she should perhaps think of returning to the workforce in some capacity even if part time at WE when you are home.

brianq

zagfles wrote: »

Just to add - you'd actually have to pay in £5600 if it's to a personal pension, and claim the higher rate relief (£1400) via your tax return. The pension provider will claim the basic rate relief.

Didn't realize that.

I understand the change to Child Benefit comes to effect on Monday. When mean-testing CB received from Monday, will they use my past year's income or the year from Monday?

When do I need to start paying anything over £50,000 to a pension and when to do the self-assessment/tax return (never done before)?

Thanks!

atush

You are still in this tax year (which ends early April) so you still have time to adjust this year's income (as the income to date may be below 50K?)

jem16

brianq wrote: »

Didn't realize that.

Yes PP tax relief is treated differently to occupational pensions which you first mentioned. However as it's a GPP that you have/had, you get the basic rate tax relief and the rest back via the tax return or a tax code change.

I understand the change to Child Benefit comes to effect on Monday. When mean-testing CB received from Monday, will they use my past year's income or the year from Monday?

Unless you opt out completely ( which would be daft as you won't be losing all of it), you would be put on SA. Have you received a letter about it yet?

When do I need to start paying anything over £50,000 to a pension and when to do the self-assessment/tax return (never done before)?

Thanks!

Payment to a pension before April 5th 2012. Tax return should follow after the end of the tax year for completion before end of January 2014.

brianq

jem16 wrote: »

Unless you opt out completely ( which would be daft as you won't be losing all of it), you would be put on SA. Have you received a letter about it yet?

Payment to a pension before April 5th 2012. Tax return should follow after the end of the tax year for completion before end of January 2014.

I didn't get any letter. It's probably because I only got over £50,000 after a pay rise in October.

So it's my income between April 2012 and April 2013 that will be assessed for this years Child Benefit?