£250 month into a pension?

Mothman

I have £250 a month to invest over the next 5 years until age 60 but won’t need to access the funds until age 65. The only one of my 3 existing pensions (NEST, Prudential & Friends Life) into which I can contribute is the FL scheme, but I was wondering if the 1.0% AMC meant I might find better value elsewhere.

I have recently opened a S&S ISA ( Vanguard Life Strategy 60 fund) but had assumed the TFLS benefit of a pension would make it a better option for this money. I currently pay tax at the standard rate but I am right on the upper limit.


Any suggestions?.

xylophone

http://www.cavendishonline.co.uk/pensions/stakeholder-and-personal-pensions/

Aviva and FL cheaper here?

atush

Who is your S&S isa with? Can you do your pension there?

Mothman

'xylophone' thanks for the link. My S&S ISA is also with Cavendish but I didn't realise they did Personal pensions as I only thought they did SIPP's. Have also just been gobsmacked by a post I've read in another thread which seems to suggest that non taxpayers still get the tax relief benefit on pension contributions, is this correct.?

My wife is 10yrs older than me and receiving a state pension of approx £7100/pa and so not currently paying tax, would it therefore make sense to open a stakeholder pension in her name?

atush

Yes, non earners can invest 2800 which the govt grosses up to 3600 per yr with tax relief.

Your wife, if she does not need the income, would do better deferring her SP as she would get an extra 10.4% each year deferred. Does not have to be full years, they prorate it.

Mothman

Thanks for the clarification. Unfortunately too late to defer as my wife has been receiving the state pension for 3 yrs .

sleepless_saver

Mothman wrote: »

Thanks for the clarification. Unfortunately too late to defer as my wife has been receiving the state pension for 3 yrs .

She can stop getting it and defer - but only once. https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/372517/dwp024-102014.pdf

And, if she hasn't already done this, she can donate some of her unused personal tax allowance to you which will help keep you paying basic rather than higher rate tax. https://www.gov.uk/marriage-allowance-guide/overview

atush

No, not too late even if she is taking it

kidmugsy

If you can afford it, consider doing all four: (i) contributions to a personal pension by your wife, (ii) suspension of her state pension, (iii) transfer of part of her personal allowance [which costs nothing], and (iv) pension contribution by you to whatever extent lets you avoid higher rate tax.

I suggest that you use money from your savings if you have to.

atush

I agree. If you can swing it, that will pay dividends.

Mothman

Many thanks for all the help & advice, it's clear I should have been asking these questions 3yrs ago when my wife retired (doh!).

This is where I seem to be at having looked into the helpful suggestions given in this thread.

1. Will do some calculations as to the payback period for deferring my wifes pension and will make a decision accordingly.
2. Unfortunately looks like I will be unable to transfer some of my wifes personal allowance as I've just checked and a recent pay increase has put my salary up to £42767 which is just over the threshold.

And for the £500/month we have to invest I was planning the following if this makes sense?

3.Open Aviva stakeholder pension for my wife and pay in £200/month
4.Open S&S Isa for my wife & pay in £75/month
5.Will reduce my current monthly S&S Isa contribution from £250 month to £75
6.Open Aviva stakeholder pension for myself and pay in £150/month

I realise the S&S Isa's aren't the most tax efficient way of investing but I don't feel comfortable having everything in pensions at the mercy of any possible government rule changes and drawdown charges.