Pension for my wife

dave23

My wife only works part time and does not have a pension apart from being auto enrolled in Nest. The amount going in per month is trivial, a few pounds a month. I believe I can make payments in to her account and she would gain the tax relief. Would it make sense to pay into Nest rather than open a SIPP?
The payments go into Nest 2026 retirement fund, she is 57 and unlikely to want to continue working until she is 66. She already has enough NI years for the full new state pension

ischofie1

Nest has a poor choice of funds available so I wouldn't put extra money in this.
Sipps are generally regarded as for people experienced in investing.
Maybe a personal pension would be more suitable. A sort of half way house.

dunstonh

I believe I can make payments in to her account and she would gain the tax relief.

it would be easier if she made them rather than you making third party payments. You can then give her the money if you operate separate finances. If you operate joint finances, then you dont need to give her anything.

Retirement planning should be viewed jointly. You both get £11k personal allowance in retirement. If you earned £22k a year in your name and your wife nothing, you would pay £2200 tax a year. Whereas if you earned £11k each you would pay no tax. So, always plan your retirement together and not as individuals.

Would it make sense to pay into Nest rather than open a SIPP?

Depends on how much you plan to put in and what investments you want. Your question is a bit like asking whether you should buy a Fiat or a Ferrari without telling us what you are using the car for.

NEST is a very basic option. Its not aimed at professional investors. It is cheap and good for small amounts though. A SIPP is far more complicated option and aimed at investors wanting more than your conventional investment options.

dave23

Any payment into Nest would come from our joint bank account. We are not far off paying off our mortgage so I was considering using the mortgage payment when available, approx £300 per month. The money built up could then be used to fund early retirement in around 6 years for both of us.

Alexland

To be honest at that sort of value it would probably be easier making additional contributions into her existing scheme. However if she is a low earner make sure her payroll will recover the tax benefit (some don't if the contribution is within the tax free allowance) and if she is saving NI through salary sacrifice she doesn't leave herself with an incomplete year.

molerat

Is her NI record fully paid up for the state pension ?

cloud_dog

The OH earns below the income tax threshold so we decided against increasing work pension contributions and instead took out a separate SIPP (or pension) so as to obtain the BRT relief for pension contributions (which she would not have benefited from by increasing her work pension contributions).

atush

your wife can put up to her entire income into a pension each year or 2880/3600 whichever s higher.

i would open a simple, cheap PP or sipp and put the extra into that instead of the NEST one. Many can be opened online, have a look at Cavendish online and HL.

dave23

Yes she already has the max NI years. I did not realise we may have problems getting the tax relief by paying into Nest. Looks like a sipp may be the way forward.

xylophone

The OH earns below the income tax threshold so we decided against increasing work pension contributions and instead took out a separate SIPP (or pension) so as to obtain the BRT relief for pension contributions (which she would not have benefited from by increasing her work pension contributions)

Presumably because her scheme uses "net pay". Pension contributions are taken before tax so that a person who does not pay tax does not benefit,

NEST uses "relief at source" - contributions are made after tax so that even if a person is a non tax payer, he does benefit from tax relief.

https://www.nestpensions.org.uk/schemeweb/NestWeb/public/memberhelpcentre/contents/do-i-need-to-claim-tax-relief-myself.html

http://www.scottishwidows.co.uk/Extranet/Literature/Doc/FP0491

xylophone

I did not realise we may have problems getting the tax relief by paying into Nest.

https://www.gov.uk/workplace-pensions/what-you-your-employer-and-the-government-pay

Even if you don’t pay Income Tax, you’ll still get an additional payment if your pension scheme uses ‘relief at source’ to add money to your pension pot.




Nest uses "Relief at Source".

https://www.nestpensions.org.uk/schemeweb/NestWeb/public/helpcentre/contents/how-should-i-calculate-tax-relief-with-my-earnings-basis.html

The tax relief method we use is relief at source (RAS), where we claim tax relief back from HM Revenue Customs (HMRC) on behalf of an eligible worker after contributions are paid to us. NEST calculates tax relief after tax and national insurance.


https://www.nestpensions.org.uk/schemeweb/nest/members/your-account/costs-and-contributions.html