Paying into Spouse Pension

Mick70

Hello again 😀
My better half , age 52 is self employed part time and just a low earner (14/15k pa)/
So often doesn’t pay income tax .
She has an old Scottish widows pension with value £12k And about £40k on an ISA savings . If I want to try boost her finances to try retire at 60 (state pension at 67 of £8k) , is she (via me sending her money monthly) better off paying into her pension pot (then I think I’m right in saying hmrc add 20% but not certain?) or should she just look to build up her savings ?
Cheers ,
Mick

Dazed_and_confused

20% doesn't get added. It's 25% of her contribution which is added (to a relief at source scheme such as a SIPP) which means 20% tax relief on the gross contribution.

Not sure how she's avoiding tax if she is earning £14/15k? Or do you mean her business turnover is £14/15k with a lower taxable profit?

You need to understand this to know how much she can contribute.

What is her attitude to risk? She is presumably comfortable with the inflation loss each year through the ISA but what about potential actual capital loss if she were to invest the pension contributions?

Dazed_and_confused

Has she actually checked her State Pension forecast on gov.uk or is £8k an assumption?

nigelbb

If you are a higher rate tax payer you would be better off paying into your own pension.

MallyGirl

nigelbb wrote: »

If you are a higher rate tax payer you would be better off paying into your own pension.

on the way in that is true, but when drawing down she will be able to take hers out tax free whereas OP will pay tax on at least some of it. It is generally an idea to try and equalise the amounts a bit as it gives flexibility

Albermarle

The OP is in line for a massive CETV from a DB transfer ( see other threads ) so I guess he is looking at his wife's position in isolation.

Normally she can contribute to a pension up to her earnings limit , whether she is paying tax on it or not , and get the 20% relief.

Although Mick70 , with that massive CETV on the way she probably does not have too much to worry about her own retirement income anyway:)

nigelbb

MallyGirl wrote: »

on the way in that is true, but when drawing down she will be able to take hers out tax free whereas OP will pay tax on at least some of it. It is generally an idea to try and equalise the amounts a bit as it gives flexibility

If the OP pays into his wife's pension he will be paying out of taxed income. Even paying tax when withdrawing on all his pension (after 25% TFLS) it's got to be better to have 40% tax relief rather than 0% tax relief.

Albermarle

The OP is in line for a massive CETV from a DB transfer ( see other threads ) so I guess he is looking at his wife's position in isolation.

Normally she can contribute to a pension up to her earnings limit , whether she is paying tax on it or not , and get the 20% relief.

Although Mick70 , with that massive CETV on the way she probably does not have too much to worry about retirement income anyway

Mick70

Dazed_and_confused wrote: »

20% doesn't get added. It's 25% of her contribution which is added (to a relief at source scheme such as a SIPP) which means 20% tax relief on the gross contribution.

Not sure how she's avoiding tax if she is earning £14/15k? Or do you mean her business turnover is £14/15k with a lower taxable profit?

You need to understand this to know how much she can contribute.

Sorry turnover , then deduct various expenses

Mick70

Yes have checked state pension , 2 more years NI needed .

Mick70

So am I right in thinking if she Pays in say £100 a week into her old £12k pension the govt contributes £20 into that pot ,even though she often isn’t paying income tax as is a low earner ? If that were case it may make more sense that simply paying £100 per week into an ISA with low interest ?