Husband/wife stakeholder pension

mameha

Situation
- My wife and I both directors of a ltd company.
- The company can afford to outlay around 6K per year on our pensions
- We are both 35 years old, pension pot now zero (just opened)

I am trying to decide how much per month to pay into the pensions.

My idea is like this:
me: 250/month
wife: 150/month

(My wife gets lower because I am doing most of the work and so really the companies money is my money. Heaven forbid we divorce, I don't want my pension to be overtly effected. She hates thinking about money and knows nothing about pensions, if it was up to her all our money would be in a current account with 0% interest. So she wont be bothered about me getting more pension)

However, I am worried about a few things:

1) My wife is quite likely to live much longer than me (it runs in her family and her nationality, she also has a very stress-free life and eats well etc compared to me)

2) I heard there may be some penalties for having "too much pension" - ie you get charged extra tax on it. I want to avoid having too much in my pension and would rather put the extra money into other investments.

3) Maybe I should just put all 500/month into my pension?

Any advice on 1/2/3 above would be much appreciated as I have to decide before april 5!

FatherAbraham

mameha wrote: »

I am trying to decide how much per month to pay into the pensions.

My idea is like this:
me: 250/month
wife: 150/month

(My wife gets lower because I am doing most of the work and so really the companies money is my money. Heaven forbid we divorce, I don't want my pension to be overtly effected.

Assets split on divorce, including pensions. So, neither of you can run off with an unfairly large (in the court's eyes) pension.

A fairly even split can be a good idea, because it maximizes usage of individual tax-free allowances when receiving pensions income.

mameha wrote: »

She hates thinking about money and knows nothing about pensions, if it was up to her all our money would be in a current account with 0% interest. So she wont be bothered about me getting more pension)

It makes sense to consider the whole of the couple's finances. If one partner is very risk averse, the other can compensate by taking on more risk. However, this strategy can backfire in the case of a separation, since it can leave one partner with too much (or too little) risk. Being the one who has all the stocks-and-shares ISAs after a separation can be a real pain, because S&S-ISAs don't convert into cash ones.

Probably better to talk things over, over the long term.

mameha wrote: »

However, I am worried about a few things:

1) My wife is quite likely to live much longer than me (it runs in her family and her nationality, she also has a very stress-free life and eats well etc compared to me)

2) I heard there may be some penalties for having "too much pension" - ie you get charged extra tax on it. I want to avoid having too much in my pension and would rather put the extra money into other investments.

3) Maybe I should just put all 500/month into my pension?

Any advice on 1/2/3 above would be much appreciated as I have to decide before april 5!

Point 3: putting all the money into a pension for just one of the partners only fails to take advantage of being a couple, and each having a personal tax allowance in the income-consumption phase.

Point 2: on the contribs you've mention, you're unlikely to get anywhere near the limits. Don't worry about it for now. It certainly has no bearing on whether or not you should start a pension before 5th April.

Point 1: perhaps your wife should retire older than you.

Warmest regards,
FA

dunstonh

Heaven forbid we divorce, I don't want my pension to be overtly effected.

Doesnt matter how you split it. Both pensions would be considered in a divorce.

2) I heard there may be some penalties for having "too much pension" - ie you get charged extra tax on it.

I wouldnt worry about with small contributions. You would need £1.25 million before you get into that area.

3) Maybe I should just put all 500/month into my pension?

Planning should ideally be split between you to ensure both of your personal allowances are used in retirement.

Any advice on 1/2/3 above would be much appreciated as I have to decide before april 5!

Why stakeholder? They are largely obsolete nowadays. More of a niche product suiting irregular payments or a basic product for people that dont care about retirement planning.

mameha

Stakeholder seemed flexible so if I end up going back to being an employee I can carry on paying in privately or possibly get my employer to pay into it instead of the usual company pension. It also seems to have tax benefits vs just putting it into a savings ISA etc.

My first goal is to buy my own house while building up the private pension, then after that move into more adventurous investments like equities or buy-to-let if finances allow.

dunstonh

Stakeholder seemed flexible so if I end up going back to being an employee I can carry on paying in privately or possibly get my employer to pay into it instead of the usual company pension. It also seems to have tax benefits vs just putting it into a savings ISA etc.

So would a personal pension. Personal pensions are usually cheaper than stakeholder as well as offering a better selection of investments.