Boost my wife's pension

Bigbudge

I an 53 and have been paying in to various pension since leaving school at 16, and have accumulated a pension pot of £80-£90K. My wife is 46 and has always had lower paid employment and has a pension pot of £3-£5K. My question is can I at 55 withdraw 25% of my pension and pay it in to a pension for my wife? This would mean my wife earing up to £10K but putting in to her pension £20K+ in one year.

kidmugsy

No, the most she can contribute in one year and still benefit from the tax advantage equals her earnings, so £10k gross. But she could do that for several tax years in a row. Or in each tax year she could put £11k (approx) into ISAs and £10k into a pension.

Note that £10k gross = £8k net; that means that she hands over £8k and the pension company reclaims the other £2k from the taxman.

One way for you to proceed would be for you to take out enough lump sum for her to fill up these tax shelters in one tax year, and then take the remaining lump sum in the next tax year.

There's also nothing to stop her using the ISAs as a temporary shelter and then moving some of the money out of them and into a pension at the next opportunity.

dunstonh

What you propose is also not a good idea as it would reduce your death benefits.

Nothing stops you now paying up to £3600 or her income (whichever is higher) each year without touching your pension (other than your affordability to do so). If you keep doing that each year and through retirement as well until you feel you are balanced enough then that would work.

kidmugsy

If you do feel that you want to crystallise your pension, in whole or in part, at 55, note that you can also drawdown an annual income from it: that too could be handed to your wife for her to contribute to a pension, subject to the remarks I made earlier.

not-so-civil

I have a similar query with a few differences. I am 65 and OH is 63. Both are receiving the state pension. I also have a previous employers pension. In addition, I went into Income Drawdown with HL in June past (sticking to the 4% drawdown - seems ok). However, OH works for NHS and is working beyond her normal pension age. She intends to retire in 18 months time. Within a few days a small multi-vestor policy with FL is due to mature.
Can I take out a SIPP for her and use the some of the endowment to put in a full years salary for this year, put the remainder in after April and follow up with most of her salary for the remaining 15 months.
When she does retire, can we then take 25% lump sum and put the remainder also into drawdown. Both our works pensions and our state pensions should be "inflation proofed". Hence the decision towards drawdown.

Many thanks for any advice or comment.

kidmugsy

not-so-civil wrote: »

... OH is 63 ... receiving the state pension. I also have a previous employers pension. ... works for NHS ... intends to retire in 18 months time. ...

Can I take out a SIPP for her and use the some of the endowment to put in a full years salary for this year, put the remainder in after April and follow up with most of her salary for the remaining 15 months.

When she does retire, can we then take 25% lump sum and put the remainder also into drawdown. Both our works pensions and our state pensions should be "inflation proofed". Hence the decision towards drawdown.

Yes, that sounds OK but here's an alternative that might be a better idea. She should defer her state pension. For each year it's deferred she'll earn an extra State Pension worth 10.4% of her regular amount. For a woman of 63 that's a fantastic deal - look at the financial pages over the weekend and you'll find how much bigger that is than any commercial index-linked annuity: let me guess - about three times bigger.

Do consider it.
https://www.gov.uk/deferring-state-pension/what-you-may-get

not-so-civil

Thanks Kidmugsy. She already deferred her State Pension for 2 years and started taking it at the beginning of this year. She now gets more State Pension than me!

kidmugsy

not-so-civil wrote: »

Thanks Kidmugsy. She already deferred her State Pension for 2 years and started taking it at the beginning of this year. She now gets more State Pension than me!

If she deferred her state pension by simply not applying for it when she became pension age, then remember she's allowed one more go at deferment. You never know, she might fancy a second shot at it.

P.S. You have checked, have you, that there is no profitable way for her to direct some extra contribution into the NHS scheme?

not-so-civil

Yes, I suggested that but OH is not very savvy with pensions. She is on the old scheme which is being phased out and has already been buying back years. Also, it can take 3-6 months to get an official reply.
She has to give notice of retirement 6 months in advance to allow them to complete the calculations. Must still be using an Abacus.