Pension Planning_Spouse with Minimal NI Contributions

tokyophil

Hi,

Hoping for some help/wisdom please, as I am out of my depth.

My spouse is a Japanese national, and has lived in the UK for circa 13 years with indefinite leave to remain. Therefore she is a UK resident for tax purposes.
She will be 41 in April, and so I'm aware we are leaving things late to plan for retirement! (I wam 41 in February)
She has zero or minimal NI contributions and for the majority of her time here she has been a student, with part time work, or a full time parent. 
She happily acknowledges that finances are not her strong point, and her English is advanced conversational but falls down with complex temniology. Therefore she is happy for me to lead on financial planning and to have such discussions - I have sought her permission before posting and she is happy for me to lead on financial planning but obviously seeking her input and agreeing everything with her!

My question is around where to start.
My thought process was to:
- Pay as much into her NI record as we can, to give her the maximum state pension at 68. I am researching her NI record and hope to complete the Gov personal acount setup this week. (Can I do this retrospectively and moving forward, and is there a tax efficient way of doing so or is it a case of paying from our joint bank account?)
- Ensure she is named as a beneficiary on my existing work pensions (I have 10 year defined benefits with NHS and so far 5 years in a DB university scheme - which will continue building up. Both of these will give her a degree of income)
- Pay the max into a SIPP in her name
- We are also building up savings in a LISA (which is in my name), which we started just before I turned 40 and are trying to pay the max £4k into every year
- We are also trying to put away as much as we can into other savings - currently low interest bank accounts and premium bonds

My questions are
- is this the correct apporach?
- what more we should be doing, where we can afford to?

Ideally we would like to retire early, around 57-58, but we accept we need to be realistic about that prospect. We are frugal and intend to pay off our mortgage by 50-51, so it may be possible, but I want to put building blocks in place so we have the maximum options and flexibility.

She is starting a small business selling to Japan, similar to eBay, and so may have a small income moving forward but it is early days and we are unsure how sustianble it will be.

Thank you for anyone who can contriubte!

Phil & Ayuri

Dazed_and_C0nfused

She is starting a small business selling to Japan, similar to eBay, and so may have a small income moving forward but it is early days and we are unsure how sustianble it will be.

If she is going to be self employed then that opens up the opportunity to pay voluntary Class 2 National Insurance (c£160/year)which unless you are a company director is about as tax efficient as it gets for accruing State Pension.

Until she/you can view her State Pension forecast (you must read past the headline figure) you won't know the overall situation but going forward looks as good as it could be.

With the SIPP do you understand the different limits for a non earner and non taxpayer?

tokyophil

Thanks - I'll look into the Class 2 NI suggestion, as that sounds fantastic!

Regarding the SIPP - I know £2880 is the max, and she will receive a top-up of 20%. I'm also unsure of the best SIPP products and realise that is a minefield - I know robo-investors are an option for beginners, but unsure how simple something like the AJ Bell or Hargreaves offerings are for someone with no knowledge/experience (and whether the returns are likely to be be significantly better, accepting some degree of risk is involved in all investments)
Also the SIPP won't give her much income at those levels, although better than nothing and if she starts earning above the threshold we can add more as it is relatively tax efficient

Thankj you

Dazed_and_C0nfused

£2,880 is only the max for non earners.

Non taxpayers who have pensionsable earnings can contribute 100% of their business profits if they wish.  For example if your wife made £5,000 profit she could contribute £4,000 and would receive £1,000 tax relief giving her a gross contribution (and pension fund) of £5,000.

NB.  The "top-up" is 25% not 20%.  It is 20% tax relief i.e. of the gross contribution.

p00hsticks

tokyophil said:

She has zero or minimal NI contributions and for the majority of her time here she has been a student, with part time work, or a full time parent. 

You make a fleeting reference to you (her ?) having one or more children  - are you as a couple entitled to receive child benefit ?

If so, is it or can it be in her name, as this would ensure she got NI credits until the youngest turns twelve.

tokyophil

Hi all

Thanks for your fanstastic tips/feedback!
I have some research to do so she is setup with the best SIPP and ensure she pays into it, as much as she can reasonably afford (Her motivation for the business is to support our income, allow for more regular travel to Japan to visit family and to treat ourselves occassionally. Putting it all into a pension fund would demotivate her so there is a balance to be struck!!).

I also need to look into the Child Benefit situation - that is a really good tip thanks. Naiively it may be in my name - I will have to see if that can be changed, and possibly backdated. The only beenfit we receive is the standard allowance, around £80 for child 1 and £60 for the 2nd - I presume this is the correct benefit to receive the tax break?

Logging onto the Gov Identify process is proving frustrating - for some reason hitting a block with Barclays but will persist!

Thank you so much, everyone

Albermarle

I would not stress too much about the SIPP provider . With these modest amounts, small difference in charges is not going to make much difference. Due to your lack of knowledge, I would stick to something simple , like this one https://www.legalandgeneral.com/investments/self-invested-personal-pension-sipp/
Or Nutmeg or Wealthify.
For something with a wider range but not overcomplicated you could also look at Vanguard SIPP .
The main point is that due to her age you should choose a relatively risky/high growth options within one of these pensions as she has 20 years to ride out the ups and downs.

Dazed_and_C0nfused

The only beenfit we receive is the standard allowance, around £80 for child 1 and £60 for the 2nd - I presume this is the correct benefit to receive the tax break?

It's beneficial for National Insurance, not tax.

In fact you should make yourself aware of the High Income Child Benefit Charge.  It may not apply now but you need to understand it so you can notify HMRC if it ever does.