DB pensioner - start a new DC pension or a S&S ISA
As I near retirement I have been reading more on here and have benefitted greatly from the sound advice from various contributors. I like the fact that we can discuss our finances with complete strangers but at the same time know that the advice given is with the OP’s best interests at heart. Thanks in advance to anyone taking the time to read this and if the answers benefit anyone else then that’s even better.
My wife 58 took early retirement at 55 from the NHS and is in receipt of a pension currently paying £8826.60pa. She also received a lump sum of approx. £25000 which we decided at the time to use as a means to give a monthly top up to her pension over 144 months at £177 per month until state pension kicks in. This lump sum has just been in a range of 1yr, 2yr and 3yr savings bonds and the 3yr is maturing this month. We intend to try and continue ring fencing this money to give her that guaranteed top up to her pension income. My thoughts are that we have another 3 savings bonds maturing this year and I was thinking of starting another small pension for her to benefit from a government boosted tax donation. I’ve read on here that she can contribute up to £2880 per year for the government to add 20% tax relief but would she qualify because at this time she doesn’t pay any income tax. Alternatively as she would be in receipt of the state pension at 67 is it worthwhile contributing to a DC pension over 10 years or would it be better investing in a new S&S ISA. I would also note that if interest rates on savings were not so poor we would probably have just started new savings bonds but this forum has opened my eyes to other options.
As an aside from what I read on here last year, over the past 12 months I increased my pension contributions through salary sacrifice to come below the Scottish higher tax rate of £43,662 so that my wife could transfer me 10% of her personal tax allowance. I have also followed links on here to check my wife’s and my own state pension forecast and she has 3 years class 3 NI contributions to pay to enable her to receive the full state pension. We intend to pay this off in full in the next few weeks.