Paying into Spouse Pension to try build it up

Albermarle

After all you are likely (?) to be paying more than enough tax for both of you.

Yes and if I was Mick70, I wouldn't be worrying about my wife's pension , I would be worrying how to spend the massive CETV coming his way:cool:D

Mick70

Albermarle wrote: »

Yes and if I was Mick70, I wouldn't be worrying about my wife's pension , I would be worrying how to spend the massive CETV coming his way:cool:D

Hello ! On my CETV thread I’ve posted that the advisor I was using wasnt fully being clear in his dealings , wasnt discussing any risks etc wasn’t clear about fees (and then i found out very high), was hard to get hold of, no written analysis , was just pushing for us to take the transfer . As of today I won’t be using him as all the warnings were there and so will try to find a local trusted IFA , it maybe too late for us now to make the 3 month deadline (and we still not 100% sure what do ) but my DB provider has said i could then pay small fee to get another valuation if need , feel like I’ve wasted a month but also it’s been a learning curve

michaels

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.

The op's wife can get tax relief on contributions up to her salary even though she is paying little or no tax. Depending on her state pension position and hours worked (nmw) she could also look to us salary sacrifice to save the NI. She should probably look to withdraw up to the basic rate threshold when drawing down prior to state pension age putting any extra she does not need then into an is a. Thus she is likely to gain the tax relief on the way in and may pay no tax on the way out which is likely to be just as good as for the op to save 40% on the way in but pay 20 on the way out.

Mick70

so if paying no tax on current earnings say..

better to put it into the pension and the govt add 20% to her contributions made ?

or pay it into an ISA ensuring no risk and no tax or fees when withdraw

MallyGirl

given that you say it needs building up, that suggests that she will be able to keep annual withdrawals below the tax threshold so govt 20% boost on the way in and no tax on the way out has to be the way

Mick70

yes the "plan" is so that she can have a pension pot of £200k , to get an annual pension of £10k p.a over a 20 year period (60-80) , so yes should be no tax on withdrawls either way

Albermarle

or pay it into an ISA ensuring no risk

There is only no risk if you put it into a Cash ISA / or non ISA savings accounts

In a S&S ISA you are invested in the markets so there is always some risk . What investments you have inside the S&S ISA will determine the level of risk .
So it is exactly the same situation as with a pension from a risk point of view .
Except with the pension you get a boost from the tax relief , so this mitigates the risk to some extent.

atush

or pay it into an ISA ensuring no risk and no tax or fees when withdraw

Isas are a tax wrapper, so incur the same risk as pensions if the money is invested.

Mick70

Sorry, I was referring to cash ISA

jamesd

For others, Mick70 has a pension transfer of £1.7 million pending so all money paid into hiss pension is ineligible for a pension 25% tax free lump sum and has either 55% or 25% plus income tax lifetime allowance charge. 40% relief gets 100% into a pension at 60% cost but on the way out it's reduced to 45% (55% charge) or [STRIKE]35%[/STRIKE] 45% ([STRIKE]25% + 40% income tax[/STRIKE] 25% LTA leaves 75% then 60% left after 40% income tax on that is 45%). Basic rate tax on the way out is impractical at current ranges, it'll be needed to avoid the lifetime allowance charge on growth at age 75.

Mick70, I suggest gross pension contributions of 100% of her pay. But only taking out up to her personal allowance. Then, later, the rest can be used to buy a single life annuity in her name.