Early Retirement?

carrspaints

Sorry Xylophone. Yes, typo - I became a member in August 2002.

carrspaints

Just in case this was missed due to overlap of posts on previous page:

My wife has a S&S ISA with Vanguard which we opened for her in November 2021. There is only £5k in that which is invested in a lifestyle account.

Since she has an account with Vanguard, we'd like to open her SIPP with them too. On the Vanguard Site, there are 3 options when paying in:

1. She pays in using her debit card details
2. A 3rd party pays in (i.e., me) up to 2,880.00
3. Her employer. Irrelevant since she is unemployed.
   

We have a joint bank account, so can she just pay in using her debit card and still enjoy the £720.00 p.a. tax relief? Or do I need to "gift" her the funds?

Finally, assuming she or I pays in £2,880.00 every year for the next 10-years, will she have access to those funds tax free when her State Pension kicks in? The £2,880.00 she or I would pay into the SIPP each year is from our bank account - money from my salary that has already been taxed. Obviously don't want to pay tax twice. Apologies if this is a silly query for some reason.

Thanks

Linton

carrspaints said:

Just in case this was missed due to overlap of posts on previous page:

My wife has a S&S ISA with Vanguard which we opened for her in November 2021. There is only £5k in that which is invested in a lifestyle account.

Since she has an account with Vanguard, we'd like to open her SIPP with them too. On the Vanguard Site, there are 3 options when paying in:

1. She pays in using her debit card details
2. A 3rd party pays in (i.e., me) up to 2,880.00
3. Her employer. Irrelevant since she is unemployed.
   

We have a joint bank account, so can she just pay in using her debit card and still enjoy the £720.00 p.a. tax relief? Or do I need to "gift" her the funds?

Finally, assuming she or I pays in £2,880.00 every year for the next 10-years, will she have access to those funds tax free when her State Pension kicks in? The £2,880.00 she or I would pay into the SIPP each year is from our bank account - money from my salary that has already been taxed. Obviously don't want to pay tax twice. Apologies if this is a silly query for some reason.

Thanks

I am somewhat surprised by the option that Vanguard appear to give of an employer contributing.  They say elsewhere that they do not support employer contributions (except for directors).

I think that your wife should be using her own debit card to keep everything clear.  I am not sure whether a 3rd party can actually pay in a pension contribution because of money laundering concerns..  No matter who physically pays it in it is treated as if she paid the money.She would get the £720.

After the first 25% tax free the remainder of the drawdown would be taxed as income alongside any other income she may receive.  Once she starts receiving her SP,  currently £9627.80 added to the £3600X3/4=£2700 would give a total just below her tax allowance.  Depending on the levels of SP and the tax allowance it is possible that at some future date a small amount of tax would be due.

Albermarle

So if inflation is at 9%, then I guess the spending power of this DB pension is heading South?

The inflation increase rules for your DB pension are pretty typical for a private sector DB scheme. Only some public sector schemes have uncapped inflation increases.  You may take comfort from the fact that DC schemes ( which any CETV transfer would have had to go to) have all lost about 10% this year in value and have been additionally hit by the full inflation problems. So effectively 20% down in real terms. 
Hopefully inflation will subside next year to some extent.

1. She pays in using her debit card details
2. A 3rd party pays in (i.e., me) up to 2880.00
3. Her employer. Irrelevant since she is unemployed.
   

We have a joint bank account, so can she just pay in using her debit card and still enjoy the £720.00 p.a. tax relief? Or do I need to "gift" her the funds?

Point 2 is possible but can be a bit more faffing about/filling in forms.
Paying by debit card from a joint account should not be a problem as far as I am aware. 

Linton

Albermarle said:

So if inflation is at 9%, then I guess the spending power of this DB pension is heading South?

The inflation increase rules for your DB pension are pretty typical for a private sector DB scheme. Only some public sector schemes have uncapped inflation increases.  You may take comfort from the fact that DC schemes ( which any CETV transfer would have had to go to) have all lost about 10% this year in value and have been additionally hit by the full inflation problems. So effectively 20% down in real terms. 
Hopefully inflation will subside next year to some extent.

1. She pays in using her debit card details
2. A 3rd party pays in (i.e., me) up to 2880.00
3. Her employer. Irrelevant since she is unemployed.
   

We have a joint bank account, so can she just pay in using her debit card and still enjoy the £720.00 p.a. tax relief? Or do I need to "gift" her the funds?

Point 2 is possible but can be a bit more faffing about/filling in forms.
Paying by debit card from a joint account should not be a problem as far as I am aware. 

2% is a very mean cap.  However, wont the deferred pension rise with CPI until it can be taken?  If so this is another factor to consider as it is unlikely that a transfer to DC will do this at current inflation rates.

handful

Albermarle said:

So if inflation is at 9%, then I guess the spending power of this DB pension is heading South?

The inflation increase rules for your DB pension are pretty typical for a private sector DB scheme. Only some public sector schemes have uncapped inflation increases.  You may take comfort from the fact that DC schemes ( which any CETV transfer would have had to go to) have all lost about 10% this year in value and have been additionally hit by the full inflation problems. So effectively 20% down in real terms. 
Hopefully inflation will subside next year to some extent.

1. She pays in using her debit card details
2. A 3rd party pays in (i.e., me) up to 2880.00
3. Her employer. Irrelevant since she is unemployed.
   

We have a joint bank account, so can she just pay in using her debit card and still enjoy the £720.00 p.a. tax relief? Or do I need to "gift" her the funds?

Point 2 is possible but can be a bit more faffing about/filling in forms.
Paying by debit card from a joint account should not be a problem as far as I am aware. 

My situation is similar in some aspects, particularly around the fact my wife has a Vanguard Sipp which we are trying to build up. We paid about £3500k in a couple of months ago from a joint account and have not had any issues or queries in doing so. I wasn't actually aware of the £2880 limit to be honest so although the money is essentially my wages and as it came from a joint account I'm assuming Albemarle is right and it isn't a problem..

Albermarle

handful said:

Albermarle said:

So if inflation is at 9%, then I guess the spending power of this DB pension is heading South?

The inflation increase rules for your DB pension are pretty typical for a private sector DB scheme. Only some public sector schemes have uncapped inflation increases.  You may take comfort from the fact that DC schemes ( which any CETV transfer would have had to go to) have all lost about 10% this year in value and have been additionally hit by the full inflation problems. So effectively 20% down in real terms. 
Hopefully inflation will subside next year to some extent.

1. She pays in using her debit card details
2. A 3rd party pays in (i.e., me) up to 2880.00
3. Her employer. Irrelevant since she is unemployed.
   

We have a joint bank account, so can she just pay in using her debit card and still enjoy the £720.00 p.a. tax relief? Or do I need to "gift" her the funds?

Point 2 is possible but can be a bit more faffing about/filling in forms.
Paying by debit card from a joint account should not be a problem as far as I am aware. 

My situation is similar in some aspects, particularly around the fact my wife has a Vanguard Sipp which we are trying to build up. We paid about £3500k in a couple of months ago from a joint account and have not had any issues or queries in doing so. I wasn't actually aware of the £2880 limit to be honest so although the money is essentially my wages and as it came from a joint account I'm assuming Albemarle is right and it isn't a problem..

Your wife can not claim tax relief on your earnings, regardless of how the money is being paid. or where it came from.
If she has no earnings then the maximum she can add is £2880 per tax year. If she is a non earner and has paid in £3,500, then she needs to contact the provider to inform them of the mistake and they will arrange a refund.
If you do not inform the provider, HMRC will discover it eventually and then repaying it will be more complicated.
If she has some employment earnings above £3,500, then no problem. 

xylophone

We have a joint bank account, so can she just pay in using her debit card and still enjoy the £720.00 p.a. tax relief? Or do I need to "gift" her the funds?

A third party contribution is perfectly possible and legal.

https://techzone.abrdn.com/public/pensions/3rd-party-pension-conts#:~:text=A third party pension contribution is a contribution made on,- for example, a trust.

It is really just a question of whether the pension provider permits/facilitates through its administrative processes.

However, if you and your wife have a joint account, there should be no problem at all with her using her debit card on that account to finance the contribution (s).