Pension and Divorce

wotsthat

Just been reading one of the pension and divorce threads and it got me thinking.

Has anyone come across people who divorce share the pension pots and then reconcile? There could be significant income tax savings.

WillowCat

That has crossed my mind before!

atush

It has been discussed, but no one has said they have done it?

MFW_ASAP

If you can't bring yourself to divorce your (beloved) OH in order to gain a tax break....

Is there anything to stop you from taking the 25% tax free lump sum and putting it into your spouses pension? It would gain a further 20% in tax relief as well and help to balance the books if one of the couple is a high earner and the other has a much smaller pension due to caring for children.

The worst case scenario would be for the high earner to continue to pay higher rate tax in retirement while their partner doesn't even use up their £10k per year tax free allowance.

Dunnit

Nothing to stop you doing this at all but contributions are limited each year to the lower of £40k or the earnings of the receiving spouse; or £3600 if no salary.

kangoora

MFW_ASAP wrote: »

If you can't bring yourself to divorce your (beloved) OH in order to gain a tax break....

Is there anything to stop you from taking the 25% tax free lump sum and putting it into your spouses pension? It would gain a further 20% in tax relief as well and help to balance the books if one of the couple is a high earner and the other has a much smaller pension due to caring for children.

The worst case scenario would be for the high earner to continue to pay higher rate tax in retirement while their partner doesn't even use up their £10k per year tax free allowance.

I'm going to be doing that in a few years time (younger wife who will continue to work for a couple of years after I retire). That is to get around the fact that her current (and forecasted) pension pot wouldn't sustain drawings up to the tax free allowance. Plus I get salary sacrifice and she doesn't.

What I'm really hoping for is for the 40% tax relief to continue for 3-4 years and then switch to 30% tax relief for BR tax payers

atush

I believe there is a plan afoot to share 1K of the annual PA from one spouse to another.

this could mean if they dont have enough pension to get to their PA you could save tax on it. Even HRT?

kangoora

atush wrote: »

I believe there is a plan afoot to share 1K of the annual PA from one spouse to another.

this could mean if they dont have enough pension to get to their PA you could save tax on it. Even HRT?

Cheers Atush, here's hoping.

That could be useful on retirement, atm I'm salary sac'ing well into BRT (50% + bonus sacrifice, which with company contributions takes me to almost the annual allowance) so not too useful at this time I guess.

xylophone

I believe there is a plan afoot to share 1K of the annual PA from one spouse to another.

this could mean if they dont have enough pension to get to their PA you could save tax on it. Even HRT?

http://www.professionaladviser.com/ifaonline/news/2317348/married-couples-can-transfer-gbp1k-of-personal-allowance-to-partners-as2013


"From 2015-2016, couples where neither partner is a higher or additional rate taxpayer will be able to transfer, with the move worth £200 to eligible couples."

wotsthat

Maybe the government are trying to provide a disincentive to divorce?

Pension sharing between couples where one partner has significant savings and the other very little is a tax loss for the government.