Can anybody check my very rough figures?

Rowbo

Thank you so much for all of these replies. I have dipped in and out of the forum since originally posting my original post but only now have the chance to reply properly.

Thank you for the explanation on the rules for the DC pension. That cleared up a few questions i had. However i think i still have a bit of reading up to do in this area.

The child benefit point is an interesting one which i have not looked into. I am not sure we could go down to that amount but its certainly worth considering. My husband drives a company car, how will this affect us in this calculation?

If we put the DC pension into a flexi-access drawdown account as mentioned above, what happens if my H dies before me? Does the age 75 rule still apply?

jamesd, thank you for your very detailed post with calculations. I need to go back over that to get it all a bit clearer. Very helpful!

Rowbo

Kynthia wrote: »

While your husband should be maximising the 40% relief by contributing enough into the pension to be a basic rate tax payer, this also has the benefit of getting you child benefit and the higher amount of childcare vouchers (if his employer offers them). Child benefit should be in your name to get the NI credits in case your earnings ever drop and you don't get a qualifying year otherwise.

At the moment the concern is you won't have enough to live on should he predecease you as most DB pensions pay 50% or less to a spouse. This may sort itself out over the next decade or two if he's only now contributing to a DC scheme.

However once your husband has put enough in to maximise the employer contribution and use the 40% tax relief (don't forget childcare vouchers and other salary sacrifice schemes will also go towards this) he should stop. Then further contributions should go into a pension in your name where you will get the contributions crossed up even though you don't pay tax. What pension and how much depends on whether you are self employed or a limited business so more info would be needed to advise on this.

Do you both have life insurance?

Thank you for your reply. I will certainly look into the child benefit area of this.
I am self employed, just a small business working around the kids.

We have life insurance that covers our mortgage. My husband is a Type1 diabetic so it was very difficult to get him insured at all.

Rowbo

Triumph13 wrote: »

If you have an emergency fund in place then your top priority has to be to get DH's taxable pay down to £50k. Assuming no other income / taxable benefits then after his current 15% pension contributions his taxable income is £56,100. Contributing another £6,100 to a pension will only cost about £1,860 as with two kids the child benefit clawback means his marginal tax rate is about 58% at the moment!


Next priority is to use up any remaining higher rate tax band with pension contributions.


Only after that should you then look at making pension / LISA contributions in your name.


Overpaying the mortgage or building up investments outside a pension scheme only make sense if a) you are worried about stability of employment, or b) you expect to be able to retire before the age at which you can access your pensions - currently 55 but expected to rise to 58.

I think i would always like a back up pot outside of a pension. We'd love to retire as early as possible and also have thoughts of purchasing a buy to let (maybe). It would be good to have options. However i am coming around to the idea of not over paying the mortgage and putting that money into investments instead.

Dazed_and_confused

The car benefit value (provided by his employer each year on form P11D) is taxable income so is included in the calculation.

Child Benefit works slightly differently to income tax though so you need to think about "adjusted net income". Gov.uk explains this here,

https://www.gov.uk/guidance/adjusted-net-income

kidmugsy

While you are doing your homework, OP, it would also be valuable to get your mind clear on any other benefits available from your husband's employer/pension scheme. For instance Life Insurance, Ill-health insurance, or whatever.

atush

We'd love to retire as early as possible and also have thoughts of purchasing a buy to let (maybe)

If you want to retire early, DC pensions and S&S isas are preferable to BTL- esp thse days after tax changes that make them less profitable.

Unless you have specialtist skills int he secotr (builder, surveyor, estate agent etc) BTL is a poor choice.