Tax relief on pension contributions while drawing from a pension

Albermarle

You should think about building up some pension provision for your wife, as if she has state pension only ( has it been checked she will get a full state pension ?), then she will be wasting some of her personal tax allowance. Even if she is a non earner/non taxpayer she can still make some contributions to a pension and get tax relief.

Another point, which may or may not be relevant, is that any DC pot left when you die, can be left directly to a beneficiary and will not be included in any inheritance tax calculations.

Tony_J

We checked my wife's NI a few years ago and paid 5 years to bring her to the full state pension.  She is the beneficiary for all my DC pension and everything else.

Audaxer

Tony_J said:

Have you any plans for the lump sum.

Not really.  My have no debt.  About 4 years worth of salary in savings and investments.  My wife has no private pension.  So a big factor is to ensure if I pop my clogs first, She has income.  Which (among other considerations) makes me think drawdown is the better option for my pension funds.  But the little diversity of the DB income seems preferable to having all my eggs in one basket.

With most DB pensions, if the pension holder dies, the spouse is still entitled to 50% of what would have been the full annual DB pension, even if the pension holder decided to take the lump sum and reduced pension. So if you were to pop your clogs early, your wife could benefit from still having your lump sum invested as well as half of what would have been your full DB pension. It's worth looking into your DB pension rules to see if that applies in your case, as well as considering the commutation factor.

Albermarle

Tony_J said:

We checked my wife's NI a few years ago and paid 5 years to bring her to the full state pension.  She is the beneficiary for all my DC pension and everything else.

She will also be able to name a beneficiary for any of the DC pot left when she dies, and none of it is ever counted as part of your or her estate for IHT calculations.

As said she could still have her own DC pension, and contribute to it now and gain some tax relief. Then assuming it will not be that big when she withdraws it, then maybe she will be able to access it all without paying any tax.

Bobinyorkshire

So, if I’m reading this right. Could I put part of my NHS pension into a SIPP? I thought this would be capped at £2880 as my earnings would be from a pension

OldBeanz

Bobinyorkshire said:

So, if I’m reading this right. Could I put part of my NHS pension into a SIPP? I thought this would be capped at £2880 as my earnings would be from a pension

No the OP is going to continue to work. No earned income then £2880 investment made up to £3600 by HMG.

Bobinyorkshire

Thank you. Didn’t realise they were still working

Albermarle

Bobinyorkshire said:

Thank you. Didn’t realise they were still working

It seems his wife is not, hence the suggestion she adds £2880 to a pension each year, to build up at least a small pot separately.