Advice required on wife's pension

skibuddy

Hi,

A few questions relating to my wife's pension.

My wife is 53 and hasn't worked for over 10 years and does not pay any tax as a result. She currently has a personal pension that says it's a "With Profits/Protected Rights" type pension (Phoenix Life), that originates from her previous employment at a company. The bid value is approx £50K and the transfer value is approx £85K. The pension doesn't allow access until about 65 years old AFAIK.

I'm 50 and in employment and pay 40% tax and also have a personal pension but this is split between Fidelity and Aegon due to previous company schemes but these are regular personal pensions that both allow drawdown. My pension fund is currently much larger than my wife's and expected to provide the main retirement income, therefore we are less dependent on my wife's

Every month she still contributes approx £31, which is from my net pay monthly income but the amount going in the pension is nearer to £40, so I'm assuming this is because basic rate tax relief is added back on.

I have a couple of questions:

1. Is there any tax break or similar that I could get for my wife's pension contributions (past and present), as this is taken from my net pay and I pay 40% tax. I'm assuming not but wanted to ask anyway.

2. It seems sensible to transfer my wife's pension to a more flexible pension, especially if she wants to take a lump sum in the next 5 years but does anyone have recommendations about where to invest. My initial thought was using Hargreaves Lansdown and having a SIPP using tracker fund(s)....basically something easy

I have previously seen an IFA (that I used to see through my company for free) about advice on both our situations. Their recommendation was to move my wife's pension to one of their managed funds. They use Dimensional Fund Advisors. Although this is still an option, they charged a percentage fee for managing the transfer ten an ongoing annual charge, on top of the Dimensional fund charge. I have no problem paying for advice and access to better investment vehicles but it feels I could achieve the same or better using HL and a decent tracker fund.

For my pensions, the recommendation was to leave these where they are but probably change the fund structure. Again I think they would charge their annual management fee, which makes me feel I would be paying for nothing.

All advice welcome but mostly I'm interested in what to do with my wife's pension. TIA

Marcon

No tax breaks on your wife's pension based on your tax position, I'm afraid. As she is a non-earner, she (or you) can contribute up to £2,880 in any tax year and the pension provider will reclaim basic rate tax and add this to her 'pot'.

stoozie1

I think the main 'tax break' you would be missing out on is the full use of your wife's Personal Allowance 0% tax rate in retirement.

You contribute £372 annually, but could be contributing £2880 annually in her name, as said above.

Go for it!

atush

Have you claimed the married allowance? To lower your own tax?

Have you considered paying all your HRTax income into a pension for the 40% relief?

Can you pay the full 2880 per year (grossed up to 3600 by TR) into your wife's pension?

If she transfers her pension, what will she lose? Ie any GARs or GMP?

greenglide

Have you claimed the married allowance?

But this isnt available for a higher rate tax payer, I thought?

Dazed_and_confused

It isn't but if op paid sufficient into a personal pension or SIPP and was then only actually liable at basic rate (or additional rate is Scottish resident for tax) then their spouse could apply and they would be eligible.

skibuddy

Thanks for the answers

I'm pretty certain there is no GAR or GMP. The IFA we saw didn't point any value in staying with the pension she has.

Looks like we are missing out on £720 of free tax relief per year for my wife then if we put in extra money to her pension. One question here; is it possible to back date payments for previous years?

Regarding myself paying all my HRTax income into a pension, I don't think I could afford to do this based on monthly expenditure, however I will need to look at whether it's worth doing this and using savings to provide the gap in income, if it means getting the extra 20% top-up on my pension contributions. I can see the financial sense in this but need to get my head around it etc.

In terms of the married allowance, I also thought this wasn't available but are you saying I need to sacrifice my salary to my pension in order to keep out of the HR Tax band ? I currently contribute 15% of salary, so would need to ramp this up a lot as I earn about £45K over where the 40% tax band ends

** btw, it would be good if anyone has recommendations/opinions on using a HL SIPP or something similar that uses an index tracker fund.

Thanks

atush

greenglide wrote: »

But this isnt available for a higher rate tax payer, I thought?

If they paid enough into the pension they could?

atush

it's a "With Profits/Protected Rights" type pension (Phoenix Life), that originates from her previous employment at a company. The bid value is approx £50K and the transfer value is approx £85K.

Generally speaking, when you see figures like this it means there is something to lose.

I'm pretty certain there is no GAR or GMP. The IFA we saw didn't point any value in staying with the pension she has.

skibuddy

atush wrote: »

Generally speaking, when you see figures like this it means there is something to lose.

Yes, that was my suspicion but I can't see anything and I believe it would mean the pension is inaccessible until my wife is 65 (need to check this), whereas a SIPP could be used for drawdown

Mnd

No, you can't backdate contributions for your wife