Self Employed Partner paying into my Pension

Benmccombe

Hi All, looking for some help!
I have a plan for my partner (of 20 yrs) who is self employed with savings and no pension to save into my company pension, obvs it has her complete support and we have discussed the issues on a personal level should we happen to split up etc. 

From a is this a good idea or not perspective, if she transferred to me £247 and I upped my pension contribution. The £247 would be enhanced by 6% by my company and then tax savings on top I worked out around £325 into my pension.

Is the only draw back that the 25% tax free lump sum option at retirement would solely sit with me? Would she be better opening a private pension scheme and claiming tax relief through annual tax self assessment instead? She earns circa £15k net from her business (we have children & she works less due to this). 

Appreciate any help you guys can offer!

dunstonh

I have a plan for my partner (of 20 yrs) who is self employed with savings and no pension to save into my company pension, obvs it has her complete support and we have discussed the issues on a personal level should we happen to split up etc.

That is unlikely to be a good idea from a logistical point of view for an unmarried couple.

in retirement, you both get a personal allowance as you do in working life.   You will be using yours up but your partner wont be.  So, you are wasting her personal allowance doing it this way.

It would be better to pay into a pension in her name.

From a is this a good idea or not perspective, if she transferred to me £247 and I upped my pension contribution. The £247 would be enhanced by 6% by my company and then tax savings on top I worked out around £325 into my pension.

The general rule of thumb is for you to contribute as much as possible to maximise the employer benefit.    It would appear you are not doing that.   So, why are you not doing that?       Are you sure your company will match/pay to a higher limit?  (most companies put a cap on the amount they will match/pay).  The most common model is that if you pay in x% of your salary they will pay in y% and if you go beyond x% they will match it up to a capped level.

Benmccombe

Thanks for the reply!
To answer your first point, my assumption is that she would use up her personal allowance by other means of income drawdown through asset sales pre retirement plus other incomes I expect her to have. 

On your second point, I am maxing my employer’s contribution to my pension, I pay 7% and they add 16%. Anything above this is enhanced by 6%. 

I hope this clarifies those points, is it still a better idea for her to go down a personal pension route do you think?
Thanks again!

MakingUpGround

What does your partner get from your pension if you were to die first?
With mine, my husband would get 33% but I think for us it's better to put the extra pension saving in his name so he gets 100% of the built up pot rather than 33% of my pension. Obviously difficult to calculate what will happen, but also my hubby would use his tax allowance for it. 
Also does your company pension recognise unmarried couples?  

xylophone

In your partner's place I would be looking to open a pension of my own.

There is plenty of choice available - she has time to open and fund in this tax year.

For example, suppose that she has relevant earnings of £20,000 a year.

She could make a net payment of up to £16,000 to a personal pension and the provider would then claim up to £4000 in tax relief and add it to her pension.

https://adviser.royallondon.com/technical-central/pensions/contributions-and-tax-relief/pension-contributions-the-basics/

Example

https://www.vanguardinvestor.co.uk/what-we-offer/personal-pension/personal-pension-account?cmpgn=PS0220UKBABSP0001EN&s_kwcid=AL!11156!3!585311514852!e!!g!!vanguard pension&gclid=EAIaIQobChMIlpTZvJjr9gIVCrDtCh1lwwnbEAAYASAAEgJB__D_BwE&gclsrc=aw.ds

Perhaps a Target Retirement  Fund would suit?

Benmccombe

Thanks both for your replies, if I died 100% of my pension would go to her as per my expression of wish selection plus I have an 8x death in service benefit so she would be minted! 😊
I think I’ll look into some personal pensions for her, she’s pretty rubbish with things like that hence my initial pay into my pension plan but looks like it could cause issues down the line. 
👍

Marcon

Benmccombe said:

Hi All, looking for some help!
I have a plan for my partner (of 20 yrs) who is self employed with savings and no pension to save into my company pension, obvs it has her complete support and we have discussed the issues on a personal level should we happen to split up etc. 

You aren't married so by definition can't divorce - and divorce (or dissolution of a civil partnership) is the only situation in which one party can be awarded part of the other party's pension (and it requires a court order to do so). Are you both aware that's the case?

Benmccombe said:

 Would she be better opening a private pension scheme and claiming tax relief through annual tax self assessment instead? She earns circa £15k net from her business (we have children & she works less due to this). 

If she pays into a personal pension the provider will claim the tax relief on her behalf and add it to her pot, so no need for her to do anything further unless the business takes off and she becomes a higher rate tax payer. 

Seems a good idea for her to have her own pension...plenty of sensible comments above which should help.

Albermarle

Lots of choice of pension providers .
SIPP Best Buy Table - Money To The Masses

However I would not worry too much about which one to begin with , whilst the amounts involved are lower. It is very easy to transfer to another provider at a later date .
In any case the choice of investment fund(s) in the pension is more important that the pension provider.
As long as she adds the cash this tax year ( not all providers will open a new account right up until April 5th and have a cut off date ) investment decision can be left until later with most providers.

doodling

Hi,

The maths around this needs to take several things into account:

1. Your marginal rate of tax.
2. Your expected rate of taxation when drawing the pension.
3. The nature of your pension (it should like a defined contribution (DC) pension to me?).
4. Your partners marginal rate of tax.
5. Your partners expected rate of taxation when drawing their pension.

If you pension is DC then there is no benefit to be gained just by having one large one vs. two smaller ones.

If your partner was to put a reasonable amount into a pension then, depending on how they did it and how much they put in, they might be able to get tax relief on money they haven't paid any tax on.  For example, if she earns £15k a year (of which ~£12k is covered by the annual allowance) and takes it as money paid to her then she will pay 20% income tax on ~£3k, i.e. £600.  If she put £5k of that into a personal pension then she would not pay any income tax and end up with £10k cash and £6250 in the pension because the pension scheme reclaims the tax on the basis that she has paid 20% on all of it.  That is correct and perfectly legal.  She can't however contribute more than £12k as she can't end up with more going into her pension (including the reclaimed tax) each year than she earnt.

Whether doing that works for you would depend on the economics around your personal tax circumstances and around her tax situation when she started drawing her pension.