How much can we pay in to pension

gh67

Hi Folks,

Just a quick question to make sure we do the correct thing, my wife currently works with the NHS Scotland and roughly earns £23k.. She is in their pension scheme and also has a private one with Standard life that's for NHS employees wanting to increase their pension. 

My question is how much could we put into the Standard life one, we've been putting in about £500 pcm for the last couple of years but would like to increase this either by a lump sum deposit or monthly deposits.

The reason for doing this is as follows, we plan to retire in the next year or two, I'm currently 54 OH currently 53. As the OH only worked partime for many years due to having our daughter he pension will be well below the tax threshold, so our plan is to put savings or money from my wages into her pension so she will receive the 20% tax on top and then won't have to pay any tax on withdrawal. 

We also don't plan to touch my pension pot until I'm 60 as we should be able to live of savings and OH's pension which she can take at 55.

Have we thought this through correctly, if not what is wrong with this plan.

Thanks
G  

Marcon

gh67 said:

Hi Folks,

Just a quick question to make sure we do the correct thing, my wife currently works with the NHS Scotland and roughly earns £23k.. She is in their pension scheme and also has a private one with Standard life that's for NHS employees wanting to increase their pension. 

My question is how much could we put into the Standard life one, we've been putting in about £500 pcm for the last couple of years but would like to increase this either by a lump sum deposit or monthly deposits.

Maximum contribution - all the info you need here: https://www.moneyhelper.org.uk/en/pensions-and-retirement/tax-and-pensions/tax-relief-and-your-pension

gh67 said:

The reason for doing this is as follows, we plan to retire in the next year or two, I'm currently 54 OH currently 53. As the OH only worked partime for many years due to having our daughter he pension will be well below the tax threshold, so our plan is to put savings or money from my wages into her pension so she will receive the 20% tax on top and then won't have to pay any tax on withdrawal. 

Don't forget to factor in state pension when she reaches that age - that combined with what she's taking from any private and NHS pension is likely to make her a basic rate taxpayer, so taking more cash sooner rather than later from a private pension could make sense if tax is the main driver.

Beware triggering the Money Purchase Annual Allowance (full details on the link I've given above).

Albermarle

Have we thought this through correctly, if not what is wrong with this plan.

The gist of the plan looks OK, but without any figures ( your pension, planned expenditure etc ) it is difficult to say anything else.

dunstonh

My question is how much could we put into the Standard life one, we've been putting in about £500 pcm for the last couple of years but would like to increase this either by a lump sum deposit or monthly deposits.

Depends on your objectives.   
Are you putting money in to improve income in retirement?
or are you putting money in to take advantage for tax efficiency but wont use it for income but maybe periodic lump sum withdrawals?
are you putting money in to get money out the estate?    or combination of these things.

How much do you need to pay to achieve your objectives?  How much can you afford?

gh67

dunstonh said:

My question is how much could we put into the Standard life one, we've been putting in about £500 pcm for the last couple of years but would like to increase this either by a lump sum deposit or monthly deposits.

Depends on your objectives.   
Are you putting money in to improve income in retirement?
or are you putting money in to take advantage for tax efficiency but wont use it for income but maybe periodic lump sum withdrawals?
are you putting money in to get money out the estate?    or combination of these things.

How much do you need to pay to achieve your objectives?  How much can you afford?

We are putting money in to improve our income in the early years of our retirement, in other words if the private pensions is empty by the time she gets state pension we'll be happy with that as she'll then have sp and NHS part 

We're also putting money in to take advantage of the tax relief as we'll get 20% added and not need to pay it back.

Our objectives have been reached with the money we have sitting, my thinking was it's earning next to nothing where it is so why not get 20% added, I know her pension pot can go down as well as up but hopefully not by 20% 

How much could we afford? my oh pension from the NHS is going to be around £7k a year if taken at 55, if i'm correct we could increase her private pot to £60 roughly which she can then take £5k from for the next 12 years until she reaches SP age. To answer your question we could easily put in £50K then with the 20% would have £60k, thats sounds to easy though. 

gh67

Albermarle said:

Have we thought this through correctly, if not what is wrong with this plan.

The gist of the plan looks OK, but without any figures ( your pension, planned expenditure etc ) it is difficult to say anything else.

I'm not sure my figures come into it, as I said we would retire around 55/56 and be able to live without touching my pot until i'm 60. If my plan for oh is correct we could possibly go to 61 before touching my pot which would hopefully give it more time to grow.

Dazed_and_C0nfused

gh67 said:

dunstonh said:

My question is how much could we put into the Standard life one, we've been putting in about £500 pcm for the last couple of years but would like to increase this either by a lump sum deposit or monthly deposits.

Depends on your objectives.   
Are you putting money in to improve income in retirement?
or are you putting money in to take advantage for tax efficiency but wont use it for income but maybe periodic lump sum withdrawals?
are you putting money in to get money out the estate?    or combination of these things.

How much do you need to pay to achieve your objectives?  How much can you afford?

We are putting money in to improve our income in the early years of our retirement, in other words if the private pensions is empty by the time she gets state pension we'll be happy with that as she'll then have sp and NHS part 

We're also putting money in to take advantage of the tax relief as we'll get 20% added and not need to pay it back.

Our objectives have been reached with the money we have sitting, my thinking was it's earning next to nothing where it is so why not get 20% added, I know her pension pot can go down as well as up but hopefully not by 20% 

How much could we afford? my oh pension from the NHS is going to be around £7k a year if taken at 55, if i'm correct we could increase her private pot to £60 roughly which she can then take £5k from for the next 12 years until she reaches SP age. To answer your question we could easily put in £50K then with the 20% would have £60k, thats sounds to easy though. 

If doesn't work quite like that.

Under the relief at source method i.e. personal contribution to a SIPP, 25% is added to what you pay.

For example you pay £500 and the pension company will add £125 in basic rate tax relief making a gross contribution of £625.

£125 is 20% of the gross contribution.

dunstonh

Our objectives have been reached with the money we have sitting, my thinking was it's earning next to nothing where it is so why not get 20% added, I know her pension pot can go down as well as up but hopefully not by 20% 

So, in all (and noting that it's 25%, not 20% when converting a relief to an uplift), you should be putting in as much as you can afford as it is also tax efficiency that you are looking for once the income need is met.