Non tax payer over 55 Advice needed

redwolf

My wife works part time for a supermarket
She does not pay income tax
Shes 57 years old

Advice needed
1)Her pension pot is about 23k - with 2 providers
Could she ask for this full pot now and take it ?
Would this make sense ?

If she continues to work and the pot goes over 30k what will that mean when she stops working.?

She pays in a small monthly amount 6% above the minimum 2% rate and her employer puts in about 3%
Would she be better just paying this extra into a bank account since she doesnt pay Tax?

Any thoughts appreciated

MallyGirl

You still get tax relief on pension contributions even if she doesn't pay tax. That is a 20% bonus

redwolf

Can you explain that statement ?
As far as i can see if she puts say 80 a month into pension
she takes that from her pay so wouldn't pay tax on it anyway ?

If she paid the 80 into a savings account wouldn't it be the same thing but
on maturity wouldn't be stuck by all those pension rules

Albermarle

No , because when she pays £80 into a pension the pension provider will claim back tax relief from HMRC . So the £80 will become £100 . If you check the info from the pension provider you should be able to see this happening . Then the employer also puts in 3 % .
As she is not earning a large salary there will be some limits in how much tax relief can be claimed but normally saving via a pension is more tax efficient than any other way . The downside is the money is not readily accessible until age 55.

Dazed_and_confused

I don't think the op had provided enough information to be certain that his wife is actually entitled to or is receiving a tax relief top up from the supermarket pension.

It is possible she is under a net pay arrangement so has say a salary of £8,000, pays £640 into the pension scheme leaving taxable pay of £7,360.

xylophone

She does not earn enough to pay tax?

How is the tax relief in the workplace pension scheme given?

If not "Relief at Source" she might be better off paying only as much into the workplace pension as gets her the maximum employer contribution and putting the rest into a personal pension.

You note that this particular scheme will "top up" but this is not usual.

https://www.nowpensions.com/help-centre/gateway/employee/general-information-gateway-help-centre/whats-the-difference-between-net-pay-and-relief-at-source

https://www.moneymarketing.co.uk/issues/20-july-2017/ros-altmann-radar-pension-tax-scandal/

redwolf

Thanks for those links the second one shows the issue it seems to confirm what i thought that she is not getting any tax relief as she doesnt pay tax

i dont believe she is getting a tax top up all i see on pension statements is
employer contribution and hers

dazed you are correct but since her tax code is 11k and she earns 8k
the only advantage i see is the employers 3%

Dazed_and_confused

Not related to pensions but has your wife considered applying for Marriage Allowance?

As far as the pension is concerned she would need to think carefully about giving up something which effectively includes free money (from the employer) but the "tax relief" she is getting seems to be of no benefit in her particular circumstances.

redwolf

yes i claim the marriage allowance as its of no use to her since she doesnt pay tax anyway i do.

agreed dazed

xylophone

Thanks for those links the second one shows the issue it seems to confirm what i thought that she is not getting any tax relief as she doesnt pay tax

If the Scheme operates "Relief at Source", then it is immaterial that she does not pay tax - she will still receive tax relief.

Are you certain that the scheme operates "Net Pay"?

Which supermarket is it?

Is the pension booklet on the net? If not, what does the pension booklet she will have been given say about tax relief?

redwolf

i will look
its ASDA

Thanks all