Wifes pension options.

maxie014

Ive sorted my own pension out,on a final salary and am topping up with maximum avc payments,which the firm i work for are increasing soon.About £63 a week at the minute think they are doubling it.
Wife a non tax payer so avc into her small local gov pension get no tax relief.top ups neither.
She is going to start paying about a £1000 a year to begin with into something.She has at least 13 years to retirement.
Options are a s and s isa.
Sipp.
She would prefer to save in cash but i think we have enough cash savings.
Would i be better paying more avc,or would that just leave me paying more tax later on a bigger pension,with her being well below the tax threshold on a smaller pension? Trying to balance it out.

AnotherJoe

She should pay into a SIPP each year. Max she can pay is £2,880, that will be grossed up to £3,600 without her needing to do anything. Thats what I do for Mrs AnotherJoe. She can then take out that £3,600 with no tax to pay when she reaches 55 or so. Where else does the guvmint give you free money like that?
She could keep it in cash but she'd be better advised putting it into some sort of investment.
If shes very conservative something like Vanguard 60 or even V40 though given the small sums (so limited losses), and the long term view, I'd say Vanguard80 or 100. (higher number the "riskier" but also more potential for growth)

If you cant persuade her, then if she puts it into a ISA the £2,880 stays as £2,880. No point whatsoever, put it into high rate savings accounts instead, she could be getting 5-6% which is a decent return. Long term that will be eclipsed by the 25% bump given by the SIPP but its still far better than a cash ISA. S&S ISA, no point, its like a SIPP without getting 25% uplift.

ps if she is super conservative, then she can;
Tax year one put into SIPP and leave as cash. Say she puts £1,000 in.
Tax year two, put the same into SIPP again, withdraw the initial sum (now with added 25%) so £1,250, and put that into a high rate savings account.
Year three, rinse and repeat.

Indeed thinking about it, for these lowish sums, that's arguably a better option for soemone that's very conservative than putting into investments. It will run out of steam when she's got abut £20k or so. I'm assuming here you havent maxxed out on high interest rate accounts.

margaretclare

Saving in cash is not a good idea. It will not grow, will only be eroded by inflation.

atush

a personal pension or Sipp. 2880/3600 per annum.

Any left over? S&S isa.

dunstonh

Options are a s and s isa.
Sipp.

Why those two?
Why have you eliminated stakeholder pension and personal pension?

She would prefer to save in cash but i think we have enough cash savings.

Does she understand that the risks of cash can actually be higher than the risk of investments over the long term?

GunJack

what about buying extra years into her lgps? just because she doesn't earn enough to pay tax, might this rather than avc be better?

Triumph13

AnotherJoe wrote: »

Max she can pay is £2,880, that will be grossed up to £3,600 without her needing to do anything. Thats what I do for Mrs AnotherJoe.

The max gross she can contribute is the higher of £3,600 and her actual total earnings. That's what I do for Mrs Triumph13.

atush

And why AVCs only for you? What is your scheme age? And when do you want to retire?

gadgetmind

My wife also works for local government. As above, AVCs are pointless, so she pays £240pcm into a SIPP, which HMG grosses up even though she pays no tax. At the end of the year, I see what she's actually earned and put in the extra. We effectively put 80% of her earnings into her pension and HMG the other 20%.

At age 55, she'll be able to start accessing it all within her personal allowance and will pay no
tax.

maxie014

She is one of them people who like to see the cash sitting in the bank.

The extra payments into the LGPS worked out at £114 a month over 10 years for an extra £1k a year pension.

The sipp sounds the better option of the two.

maxie014

atush wrote: »

And why AVCs only for you? What is your scheme age? And when do you want to retire?

Avc was easy to set up for me that was all,ive got 27 years in the scheme and aiming to retire at 62 in 10 years time,they keep tinkering with the scheme not in the members favour,so i thought the avc payments would maybe offset the reductions.