Sipp contribution (and NHS pension)

waveneygnome

Two Part question:

a)  Should I start a Sipp for my wife?

b)  How much can I contribute, in addition to her NHS pension?

Looking to start a Sipp for my wife.

She is long suffering........with me.

She is a long serving member of NHS scheme:  1995 & 2015, and continues to work/contribute.

(She loves her job, and hasn't mentioned retirement even once......but I'm trying to think ahead a bit....she's just turned 50.....maybe she's just not planning on spending her retirement with me!)

I was thinking that starting a Sipp would give her more flexibilty on the NHS pension:  as I understand it, the 1995 scheme is payable at aged 60, and the 2015 scheme payable at NRA (67).  The Sipp could be used to fund any potential 'early' retirement, without actuarial reduction of the NHS pension.

I've done a Total Reward Statement:  EE contribution 2k + ER contribution 4k = £6k into NHS pension..............does this mean I can contribute hyperthetically £34k gross into a Sipp this year?

(I'm self employed/small Ltd Co, and wife is also a long suffering Director/unpaid dogs body........so I think I can do an Employers contribtuion, which will also help reduce my Corporation tax).

Dazed_and_C0nfused

Rather than your wife contributing (and receiving tax relief) you are thinking about the company contributing, so no tax relief for your wife but the company will make the tax saving?

waveneygnome

Yes...thats what I was thinking.

waveneygnome

To confirm:  she is a Director of the Ltd Co.  No salary/wages paid to her in the past.  She does have an active role/book keeping, new ideas, helps production at busy weekends, listens to me moan.......alot.

dunstonh

she is a Director of the Ltd Co.  No salary/wages paid to her in the past. 

As a company director, it doesn't matter.   Pension contributions paid by the company are a business expense.  So, as long as the contributions dont exceed the profit, there will be a benefit. 
Theoretically, £160,000 minus contributions made over the last three years + current.

waveneygnome

Thanks Dunstonh.

If the company was to make large-ish inital contrbution (then regular monthly)......apart from the main limit of £160k.......would HMRC view this as 'excessive' or out of proprotion to her role/duties?  I was thinking of £34k initial, and ongoing variable (according to company profits, but hopefully £1k pcm).

IF I did use carry back/take off NHS contributions = say £136k could go into a Sipp...........

would this be seen by HRMC as excessive?

(Obviously she says she's priceless........but I've lost the receipt so have no way of verifying)

dunstonh

.would HMRC view this as 'excessive' or out of proprotion to her role/duties?

HMRC keep it vague on purpose.  However, it really depends on the structure of the company.  If the spouse is a 50% shareholding director then its generally not looked at as they are senior management.    If the spouse is a non-shareholding company secretary then you need to be on guard and would not likely get away with high contributions.  If the spouse is, on paper, in an employee role (some people class them as cleaner) then the pension contribution should be at the level typical for that role (that can cause issues with auto-enrolment if they do that as technically, they are an employee)

A lot of directors leave it until Feb/March (or month 10/11 of their business year) before they decide how much to pay into a pension for the year.  

(Obviously she says she's priceless........

Being priceless means very expensive.  So, I think we can all agree with that.