SIPP Contributions

crv1963

Having spent considerable time researching and reading up generally, getting advice from the good folk here as I've been learning and plotting our retirement.From the end of February we're going to be in a position to start saving into a SIPP for my wife.

I am going to be the main earner and am looking to boost my wife pension pots to enable us to retire in 3-5 years time.

Her current pension provision is-

Roughly 90k in a SERPS pot from years ago.
Roughly 6k in NEST current contribution pot and will continue workplace contributions.

Wife income after tax, nest pension workplace contributions and NI deduction is from March going to be around £1200 per month. I am thinking of opening a SIPP in her name with the aim of putting 1k per month into it from my income.

The aim of the savings is so that she may draw the SIPP pot down from age 57-67 when full SP starts, it would be drawn at around the equivalent of her SP, her other pots are available from age 60 for the SERPS pot and 67 for the NEST. Although we could transfer both to a SIPP that currently isn't the plan.

Our target is for her income from pensions to be just under the level at which she starts paying income tax. I have a DB which will be taxed hence balancing our post retirement pots by building hers now.

Given her income am I correct in believing we can save up to the whole of her net pay monthly into a SIPP?

Given that she is a BR taxpayer and I am a HR(40%) taxpayer I know saving into a pot for me would be more effective for accumulation but not as effective when drawing as I am always going to be a tax payer once I draw my DB and then also get my SP.

In 3-5 years we will be mortgage free, have a decent emergency sum. The survivors pension she would get if (probably when) I die first will of course push her into paying tax. If she goes first then I could manage on my DB and SP. She could manage nicely on the Survivors pension+drawdown and then SP.

Leaving an inheritance would be nice but not essential, so hasn't really formed part of our planning.

Linton

crv1963 wrote: »

Wife income after tax, nest pension workplace contributions and NI deduction is from March going to be around £1200 per month. I am thinking of opening a SIPP in her name with the aim of putting 1k per month into it from my income.

.......
Given her income am I correct in believing we can save up to the whole of her net pay monthly into a SIPP?

No - remember that HMRC provide tax relief on tax that she has not paid.


For example:If her gross income was say £13850 and there were no pension cintributions nor any NI her net income would be £13850-20%X £2K=£13450. But she could not pay £13450 net into a SIPP since that would attract tax relief of £3363 giving a gross contribuition of £16813, rather more than her gross income.


Better to use 80% X (Gross income-employee pension contrbutions) assuming the employee contributions are taken befor tax.

crv1963

So if I put 900 pm that is well within the guidelines? Being 75% of her net pay. Or 960 which will be 80% of her take home pay?

Albermarle

her other pots are available from age 60 for the SERPS pot and 67 for the NEST

.
I think you will find that these ages are only indicative .
All DC pots can nowadays be accessed from age 55 onwards . The fact that one was an opt out pensions from SERPS should not make any difference ( as I understand it)

dunstonh

her other pots are available from age 60 for the SERPS pot and 67 for the NEST.

The minimum age of 60 for contracted out funds was removed in 2006. It is now 55, just as other pensions. The statements may still use 60 but that is just for statement purposes. Protected rights funds (from contracting out) were reclassified as non-protected rights some years back. So, it no longer matters.

The NEST age is just a statement projection age. It too is 55 onwards.