Paying into Spouse Pension to try build it up

Mick70

Right... wife , age 52 , self employed and a low earner , £12-14k p.a , only pays minimal tax (sometimes nothing).

She has an old pension pot from 25 years ago, value £12k (scot widows)
She has an ISA with £50k - this will now be used to fund pension.

As her work is quite physical, ideally wants to retire at 60, with a pot of £200k to fund £10k pa for 20 years , at age 67 will get state pension £8 pa

I am 40% tax payer.

If I now want to try build up her pot/provision, is it best we put extra monies monthly into the ISA to keep it tax free or to pay into the old scot widows pot ? with my wife being a low tax bracket i wasn't sure what was best .

[Deleted User]

What's your age? And are you retiring early as well. If it is similar I would keep putting into yours and have the higher tax bracket claim
Unless that is you don't want to pool finances

BoxerfanUK

Good morning Mick. There will be people along far more able than I to advise, but my initial thoughts would be that it's only worth paying into the pension if you are able to benefit from some tax relief and as she's a low earner not a massive advantage to that. Certainly I would have thought maybe not a good idea to put money into a very old pension which may not be set up to take advantage of the 2015 pension reforms so maybe worth opening a SIPP.

As she pays low or nil tax she could transfer £1250 pa of her tax allowance to you as the higher earner to increase her tax liability, lower yours and that will give her a bit more leeway for pension tax relief. Apart from that I'm thinking S&S ISA.

As she's self employed there may be other ways she could save but I know next to nothing about that side of things.

Mick70

BoxerfanUK wrote: »

Good morning Mick. There will be people along far more able than I to advise, but my initial thoughts would be that it's only worth paying into the pension if you are able to benefit from some tax relief and as she's a low earner not a massive advantage to that. Certainly I would have thought maybe not a good idea to put money into a very old pension which may not be set up to take advantage of the 2015 pension reforms so maybe worth opening a SIPP.

As she pays low or nil tax she could transfer £1250 pa of her tax allowance to you as the higher earner to increase her tax liability, lower yours and that will give her a bit more leeway for pension tax relief. Apart from that I'm thinking S&S ISA.

As she's self employed there may be other ways she could save but I know next to nothing about that side of things.

good morning yourself , what mean by S&S ?
many thanks to the other contributors also

I will be 58 when wife turns 60 so hoping to retire together then.

ffacoffipawb

BoxerfanUK wrote: »

As she pays low or nil tax she could transfer £1250 pa of her tax allowance to you as the higher earner to increase her tax liability, lower yours and that will give her a bit more leeway for pension tax relief.

As Mick is a higher rate taxpayer his wife is unable to transfer part of her tax allowance to him. The recipient would need to be a basic rate taxpayer to benefit, unfortunately.

[Deleted User]

For info. I notice from other posts that the OP has done, he has a DB pension with a high CETV. So I guess this is purely down for the spouses pension and no transfer to him.
I you she doesn't need the cash now - I would look at maximising her pension inputs from her salary and you can also gift her money as well if she wants to have living expenses out of her salary. ie maximise like mad her pension contributions
Check the charges on her old pension - are they reasonable? I don't see any benefit in hitting the ISA at all - in fact I might be withdrawing it and putting it into a SIPP (but check you aren't breaching the rules of putting too much in compared to her salary)
I am just an amateur though - other might come along with more informed views

[Deleted User]

Mick70 wrote: »

good morning yourself , what mean by S&S ?
many thanks to the other contributors also

I will be 58 when wife turns 60 so hoping to retire together then.

S&S - stocks and shares rather than Cash ISA

Albermarle

good morning yourself , what mean by S&S ?

It means a Stocks and Shares ISA ( as opposed to a CASH ISA for example)

She could put most of her salary into a pension and claim basic rate tax relief on all of it , despite the fact that she is hardly paying any tax . So if she earned £10K , she could contribute £8K and HMRC would top up to £10K.
When withdrawn it would be subject to tax if she had income above her personal allowance of £12,500. In the end the tax benefit would be 6.25%.
No point in adding extra money as it would not get tax relief going in but would still be taxable on the way out . Extra money would be better off in a S&S ISA ( max £20K pa ) .

cloud_dog

Mick70 wrote: »

Right... wife , age 52 , self employed and a low earner , £12-14k p.a , only pays minimal tax (sometimes nothing).

She has an old pension pot from 25 years ago, value £12k (scot widows)
She has an ISA with £50k - this will now be used to fund pension.

As her work is quite physical, ideally wants to retire at 60, with a pot of £200k to fund £10k pa for 20 years , at age 67 will get state pension £8 pa

I am 40% tax payer.

If I now want to try build up her pot/provision, is it best we put extra monies monthly into the ISA to keep it tax free or to pay into the old scot widows pot ? with my wife being a low tax bracket i wasn't sure what was best .

Hi....Whilst from a current financial situation, you being a HRT payer, it makes sense to utilise this for further contributions in to your pension(s), you already have a significant LTA issue going forward.

I would maximise contributions in to your wife's pension(s), so as to be at least able to maximise her personal allowance when you draw down the monies. After all you are likely (?) to be paying more than enough tax for both of you.

Thrugelmir

Mick70 wrote: »

As her work is quite physical, ideally wants to retire at 60, with a pot of £200k to fund £10k pa for 20 years

That's a demanding objective given her current savings and an eight year time frame.

atush

i would up your pension to take you out of HRT, then she can transfer some of her allowance.

And yes, she should fund a PP or Sipp for herself, unless her old pension has very low charges.