Considering a Vanguard SIPP for wife

Nevergonnaretire

Hi all,

Firstly, thanks so much for all the really good information shared on this forum, its really got me planning seriously for (hopefully!) the last 10 working years I have left.

My situation is that until recently I wasn't able to save or add huge amounts to a pension, but I've recently turned 50 and in the last year or so we've managed to pay off pretty much all our debt including the mortgage so for the first time in our lives have spare money to save.

My workplace DC (fidelity) pension pot is sat at around 230k (not great I know I'm a bit worried about it), I have about 25k saved in cash and have recently started a Vanguard S&S ISA which has a couple of K in it and I plan to add a regular monthly payment of £100 or so (more when I have it) to that. I have increased my pension contributions to 30% (including the 10% company contribution) after reading about the really attractive tax savings on here and I'd really like to retire by 60 if I can. Not sure if I'll have enough but I have my fingers crossed. Both myself and the wife will receive a full state pension at 67/68 however my wife has no private or workplace pension at all, shes 6 years younger than me though so has a bit more time.

I was thinking about bridging the gap between 60 and state pension age, and obviously my pension would take a beating on its own as we'd need more than my personal tax allowance to live on. I was wondering it made sense to open a SIPP for the wife and try and get as much as we could in there for the next ten years. My thinking is that we would then effectively have double the personal tax free allowance (2k per month rather than 1K just for me) at least for the time hers lasted which would make mine last a bit longer as I wouldn't be losing any to tax early on? Does this make sense or am I talking rubbish?

Cheers!

dunstonh

Retirement planning should be viewed jointly and make use of both allowances (current and future).   

GazzaBloom

It makes sense, does your wife work? If she's not an employed earner she is limited to being able to pay in £2,880 per year into a SIPP and receive tax relief, so this will be topped up to £3,600. I would suggest that after than there is little benefit paying further into a SIPP for her vs an ISA. 

Is your pension DC salary sacrifice? If so, you may want to consider what your pension is invested in to check the fees are not too high on the underlying investments and also consider what you are invested in. Keep the faith, I reckon you're in pretty good pension building shape. 10 years is a good run at 30% pension contributions.

NedS

It makes perfect sense to make sure your wife has decent pension provision and can fully utilise her personal tax allowance each year in retirement. If she is a non-earner, she can contribute up to £2880 net (£3600 gross) per year into a pension such as a SIPP. If she is working then she can contribute up to her gross earnings. My wife does not work and I give her £2880 a year to contribute into her pension to ensure she is able to fully utilise her personal tax allowance in retirement. Despite not earning or paying tax, she still receives £720 in tax relief from the government uplifting her £2880 contributions to £3600 each year.

The other thing I would consider is balancing your pension contributions over ISA contributions which do not attract tax relief but which you are able to access before age 55 (rising to 57) if needed. Obviously it's important to have enough accessible funds in an emergency - maybe you could plan to shift more from your ISA to pensions in the last 3 years of work (57-60) for the tax relief knowing you can then access that cash at any time if needed in an emergency. Between 57-60 you could theoretically pay your whole salary (depending how much you earn) into your pension and live on ISA savings before accessing your pensions at 60.

Nevergonnaretire

Cheers for the responses.

Wife is self-employed but pretty sure doesn't earn enough to pay tax just some NI. So I think that means she should still get relief on any pension contributions although I'm unsure up to what amount?

Yes my pension is a Salary sacrifice, as I'm a higher rate earner now that should be saving a nice bit of tax! I'll struggling to find the fees on the Fidelity plan viewer, but found this on the last yearly statement (from 2021, 2022's doesn't seem to be available yet):

"Summary of charges for your Pension Savings Account The charges you paid between 1 January 2021 to 31 December 2021 Charges & Expenses (TER) £352.73 Transaction Costs £38.08 Total £390.81 The charges shown above relate to all the Investments held in your plan"

Its currently in one of the cash lifestyle investment plans, I suspect this is not optimal but there's quite a few on there and I'm really not sure what to change it to. Over time it shows how this will reduce risk moving a greater percentage from equities to bonds as you approach retirement age as is the nature of these plans. Its currently at 97% Growth (equities i assume) and 3% Defensive (bonds?) with it slowly changing from now on. In fact my retirement age on there is set to 65, so I guess it wont move too much over to Defensive investments by the time I'm 60.

NedS

Nevergonnaretire said:

Cheers for the responses.

Wife is self-employed but pretty sure doesn't earn enough to pay tax just some NI. So I think that means she should still get relief on any pension contributions although I'm unsure up to what amount?

She can contribute up to her profits after expenses (her gross taxable income). If that is less than £3600 gross then she is limited to £3600 gross the same as a non-earner.

Nevergonnaretire

NedS said:

Nevergonnaretire said:

Cheers for the responses.

Wife is self-employed but pretty sure doesn't earn enough to pay tax just some NI. So I think that means she should still get relief on any pension contributions although I'm unsure up to what amount?

She can contribute up to her profits after expenses (her gross taxable income). If that is less than £3600 gross then she is limited to £3600 gross the same as a non-earner.

Thanks I think shes sits right around her allowance so 12kish. So I think we should be OK there.

Nevergonnaretire

NedS said:

It makes perfect sense to make sure your wife has decent pension provision and can fully utilise her personal tax allowance each year in retirement. If she is a non-earner, she can contribute up to £2880 net (£3600 gross) per year into a pension such as a SIPP. If she is working then she can contribute up to her gross earnings. My wife does not work and I give her £2880 a year to contribute into her pension to ensure she is able to fully utilise her personal tax allowance in retirement. Despite not earning or paying tax, she still receives £720 in tax relief from the government uplifting her £2880 contributions to £3600 each year.

The other thing I would consider is balancing your pension contributions over ISA contributions which do not attract tax relief but which you are able to access before age 55 (rising to 57) if needed. Obviously it's important to have enough accessible funds in an emergency - maybe you could plan to shift more from your ISA to pensions in the last 3 years of work (57-60) for the tax relief knowing you can then access that cash at any time if needed in an emergency. Between 57-60 you could theoretically pay your whole salary (depending how much you earn) into your pension and live on ISA savings before accessing your pensions at 60.

Interesting thanks, that makes a lot of sense and I'd not considered that.

Nevergonnaretire

Ok I found some fees, no idea if these are good or bad:

40% of the plan seems to be:

Blackrock corp bonds all stocks 0.19%

Blackrock uk equity index 0.13%

Blackrock world (ex-uk) equity index 0.21%

Standard life global absolute return strategies 0.88%

The remaining 60% seems to be:

Cash lifestyle

Growth fund 0.19%

Defensive fund 0.172%

Seems fairly reasonable to my untrained eye

Albermarle

Nevergonnaretire said:

Ok I found some fees, no idea if these are good or bad:

40% of the plan seems to be:

Blackrock corp bonds all stocks 0.19%

Blackrock uk equity index 0.13%

Blackrock world (ex-uk) equity index 0.21%

Standard life global absolute return strategies 0.88%

The remaining 60% seems to be:

Cash lifestyle

Growth fund 0.19%

Defensive fund 0.172%

Seems fairly reasonable to my untrained eye

I had the SL Global absolute return in my last employer pension, as part of the lifestyle portfolio. As I took more interest in what my pension(s) were invested , I realised this was a dog of a fund.
Absolute return funds were all the rage a few years ago. They claimed still to produce a positive return even during market downturns, whilst still producing reasonable growth in the good times. Well over the last 5 years it is down over 8%, which is abysmal. Currently it is holding 65% in cash and you are paying them five times more in charges than the other funds.
I understand there have been large outflows from this fund over the last few years .

You may want to check how much of your current pension is in this fund.

Thanks I think shes sits right around her allowance so 12kish. So I think we should be OK there.

If she earns £12K, she can add £9,600 to a pension and £2,400, in tax relief will be added. It is less tax relief that you get at 40%, but if she can take the pension later without any ( or a low amount) of tax then could work out well.

Nevergonnaretire

Albermarle said:

Nevergonnaretire said:

Ok I found some fees, no idea if these are good or bad:

40% of the plan seems to be:

Blackrock corp bonds all stocks 0.19%

Blackrock uk equity index 0.13%

Blackrock world (ex-uk) equity index 0.21%

Standard life global absolute return strategies 0.88%

The remaining 60% seems to be:

Cash lifestyle

Growth fund 0.19%

Defensive fund 0.172%

Seems fairly reasonable to my untrained eye

I had the SL Global absolute return in my last employer pension, as part of the lifestyle portfolio. As I took more interest in what my pension(s) were invested , I realised this was a dog of a fund.
Absolute return funds were all the rage a few years ago. They claimed still to produce a positive return even during market downturns, whilst still producing reasonable growth in the good times. Well over the last 5 years it is down over 8%, which is abysmal. Currently it is holding 65% in cash and you are paying them five times more in charges than the other funds.
I understand there have been large outflows from this fund over the last few years .

You may want to check how much of your current pension is in this fund.

Thanks I think shes sits right around her allowance so 12kish. So I think we should be OK there.

If she earns £12K, she can add £9,600 to a pension and £2,400, in tax relief will be added. It is less tax relief that you get at 40%, but if she can take the pension later without any ( or a low amount) of tax then could work out well.

Hhhhhm suspect your correct, not done great:

Allocation - 36.76%
Value - £707.62

Whilst the Lifestyle strategy fund is:
Allocation - 60%
Value - £206K

That's looks a bit rubbish doesn't it!