Paying into wife's pension to get tax relief

michael5849

Hi MSE Forum

 

My wife is a housewife and does not have any income herself. I am employed and pay 45% income  tax and my pension annual allowance has been tapered down to  £4,000. I have read that it is possible to pay into my wife’s pension each tax year and that she then benefits from 20% tax relief on the amount paid in so that she effectively gets £1.20 for each £1 paid in. If that works then I’d like to pay in quickly before the end of the current tax year. Have some questions on how that works.

 

What is the maximum I can pay into her pension?

Does the payment have to come from me or could she also pay in herself, using her savings to pay into her pension each tax year?

Can I still pay into her account despite having my own pension annual allowance tapered to the minimum of £4,000? I have already used all of that £4,000 allowance for contributions Into my own pension.

Currently she doesn’t have a personal pension account. Could you recommend any providers that can quickly set up an account online before the end of the tax year?

How long does it take to set up a personal pension account?

Are there any restrictions on how the money in the pension must be invested to benefit from the 20% tax relief? For example can her pension freely invest into cash, stocks, bonds, … ?

 

Thanks!

 

Mike

 

 

 

xylophone

My wife is a housewife and does not have any income herself. 

In these circumstances, she may make a net contribution of £2880 to a pension scheme operating "relief at source" and the provider will claim £720 from HMRC and add it to her pot.

See link in

https://forums.moneysavingexpert.com/discussion/comment/79082634#Comment_79082634

She can make the contribution from her savings or you may provide the money (see link).

See also 

 https://forums.moneysavingexpert.com/discussion/comment/79073965#Comment_79073965

As for a provider, you could try

https://www.hl.co.uk/partners/search/self-invested-personal-pension?partners=1&theSource=PCHLP&Override=1sitelink=B&gclid=EAIaIQobChMI1J6Ls-Pj9gIVOIBQBh16Hww_EAAYASABEgIzZvD_BwE

Are there any restrictions on how the money in the pension must be invested to benefit from the 20% tax relief? For example can her pension freely invest into cash, stocks, bonds, … ?

The options mentioned will be available within the SIPP.

Dazed_and_C0nfused

I have read that it is possible to pay into my wife’s pension each tax year and that she then benefits from 20% tax relief on the amount paid in so that she effectively gets £1.20 for each £1 paid in. 

Your maths are a bit out there.

If she contributes £1 then 25p in basic rate tax relief is added making a pension fund of £1.25.

But as xylophone has explained as a non earner she will be limited to paying £2,880 (£3,600 with the tax relief added) each tax year.

michael5849

Thanks xylophone and Dazed!

MX5huggy

If you want to do this quickly and probably as cheaply as possible I set up a SIPP and funded it using a debit card for the wife in less time than it take to do an online Tesco’s shop, with Vanguard 2 weeks ago. I chose VEVE fund total cost less than 0.3%. 

Albermarle

MX5huggy said:

If you want to do this quickly and probably as cheaply as possible I set up a SIPP and funded it using a debit card for the wife in less time than it take to do an online Tesco’s shop, with Vanguard 2 weeks ago. I chose VEVE fund total cost less than 0.3%. 

Just to be clear to anyone interested , it is also very easy and quick to set up a SIPP online with other providers as well. 

michael5849

Thanks, I went for Penfold. Was very fast to set up.