Provider shortlist for £2880 per year pension

Albermarle

Pat38493 said:

By the way what is the official justification for this £3600 allowance for non earners?

The only way I can think of to justify it is that for most people, you can consider it as a tax relief of taxes that you paid in the past while you were working.  Other than that I can't think of a particular reason for this as it seems to be used mainly by IFAs to get £180 free for their clients each year.

Compared to the Tens of Billions paid out to high earners in the form of 40% tax relief, and the increasing amounts of NI avoidance through salary sacrifice, then paying non earners £720 pa is a drop in the ocean and hopefully encourages people to at least start a pension. Although as said it is probably not necessarily doing its job and is used more by people like us.

Albermarle

 I suspect most £3,600 contributions are done for tax efficiency.  Certainly are on the advice side.

Before the budget I always presumed it was not sensible for a non earner who was above or around the LTA limit, to add this £3600 . Although I suppose you could argue a trade off between paying LTA and saving on IHT.

Now I guess it does seem sensible, unless of course the LTA is brought back and/or the IHT exemption on pension pots is removed/changed at some point.

So much uncertainty.........

Pat38493

Double checking one point....

By doing this I would guess that my wife would trigger the MPAA when she takes the money out again if it wasn't already triggered?   (I don't think this is an issue as she doesn't seem to have any desire to go back to work, and even if she did she wouldn't be paying more than 10K into a pension per year).

Albermarle

Pat38493 said:

Double checking one point....

By doing this I would guess that my wife would trigger the MPAA when she takes the money out again if it wasn't already triggered?   (I don't think this is an issue as she doesn't seem to have any desire to go back to work, and even if she did she wouldn't be paying more than 10K into a pension per year).

Yes it would trigger MPAA.

Audaxer

Pat38493 said:

By the way what is the official justification for this £3600 allowance for non earners?

The only way I can think of to justify it is that for most people, you can consider it as a tax relief of taxes that you paid in the past while you were working.  Other than that I can't think of a particular reason for this as it seems to be used mainly by IFAs to get £180 free for their clients each year.

For those of us getting £180 out of it, we may not be working but we are still paying tax on our pensions, so I would have thought it could be justified that way.

I thought most retirees on here who pay £3,600 gross into a SIPP each year, did it themselves rather than through an IFA. 

Albermarle

I thought most retirees on here who pay £3,600 gross into a SIPP each year, did it themselves rather than through an IFA.

I am sure you are right, but away from the generally well informed bubble of a pensions forum, most people would not be aware of it, unless they had an IFA.

AlanP_2

Albermarle said:

I thought most retirees on here who pay £3,600 gross into a SIPP each year, did it themselves rather than through an IFA.

I am sure you are right, but away from the generally well informed bubble of a pensions forum, most people would not be aware of it, unless they had an IFA.

I know 2 people who have IFAs or FAs (not sure which) advising them.

Neither had been made aware of this.

Pat38493

Would I be right in thinking that it doesn't really make sense for me to do this unless it's done with my wife's money, if I am a higher rate taxpayer in employment but expecting to be basic rate on withdrawal?

I would be better off paying the spare £2880 into my own pension if it's my money?

Audaxer

Pat38493 said:

Would I be right in thinking that it doesn't really make sense for me to do this unless it's done with my wife's money, if I am a higher rate taxpayer in employment but expecting to be basic rate on withdrawal?

I would be better off paying the spare £2880 into my own pension if it's my money?

If you are currently a higher rate tax payer and when you withdraw it you will be a basic rate tax payer, then you benefiting from doing it.  If your wife pays £2,880 into a SIPP and currently has enough free personal tax allowance to take it out without paying any tax, she will benefit by gaining the full £720.

It would therefore make sense for you both to do it if you can afford it.

Pat38493

Audaxer said:

Pat38493 said:

Would I be right in thinking that it doesn't really make sense for me to do this unless it's done with my wife's money, if I am a higher rate taxpayer in employment but expecting to be basic rate on withdrawal?

I would be better off paying the spare £2880 into my own pension if it's my money?

If you are currently a higher rate tax payer and when you withdraw it you will be a basic rate tax payer, then you benefiting from doing it.  If your wife pays £2,880 into a SIPP and currently has enough free personal tax allowance to take it out without paying any tax, she will benefit by gaining the full £720.

It would therefore make sense for you both to do it if you can afford it.

My wife has an NHS DB pension and is a BR taxpayer