Paying into Sipp when a low earner

SVaz

I know the £2880 limit is for for non earners,  does that also apply to someone who earns under the lower earnings limit of £6396?  I employ my Wife but am not registered as an employer as it’s not necessary at the above limit.
I know I could pay her a bit more to become officially an employer but that means running payroll.  She doesn’t need the NI credits that come with earning between the LeL and the Primary threshold /being on PAYE as she already qualifies for full SP,  but it would be advantageous to be able to pay more than the minimum into her Sipp as I have a much larger pension than she does. 
If it IS possible to stay under the LeL and pay more in,  how does she go about it?   

Marcon

SVaz said:

I know the £2880 limit is for for non earners,  does that also apply to someone who earns under the lower earnings limit of £6396?  I employ my Wife but am not registered as an employer as it’s not necessary at the above limit.
I know I could pay her a bit more to become officially an employer but that means running payroll.  She doesn’t need the NI credits that come with earning between the LeL and the Primary threshold /being on PAYE as she already qualifies for full SP,  but it would be advantageous to be able to pay more than the minimum into her Sipp as I have a much larger pension than she does. 
If it IS possible to stay under the LeL and pay more in,  how does she go about it?   

You need to register as an employer if you want to make employer pension contributions on her behalf - and with HMRC's free payroll software, it's extremely easy: https://www.gov.uk/basic-paye-tools 

Otherwise she simply needs to make the contributions herself and the SIPP provider will collect the 'tax top up' on her behalf. She can contribute 80% of her earnings from you, with the tax top-up bringing her (gross) contribution up to her earnings, if that's what she wants to do. The fact she's a non-taxpayer doesn't matter - she can make a gross contribution of 100% of her earnings.

SVaz

That’s good to know thanks.  

Nebulous2

Things to think about - not necessarily to answer here.

At what age do you intend to stop work? Will she stop at the same time? Do you reach state pension age (SPA) roughly at the same point, or is there a gap? 

Most of our income has always been in my name. I retired before SPA with a DB pension which takes me into basic rate tax. I struggle with my wife having a tax allowance which is unused while I'm paying tax. I know it was the case while I was working, but it seemed less important then.

It also complicates the issue about how well off she would be if I pre-decease her. My Grandmother lived for 27 years after my Grandfather died. 

We are trying to build a pension of sorts for her now with the £2880 / 3600 contributions. 

I'd say it is worth putting all your wife's earnings into a pension, particularly if she intends to stop well before SPA. 

SVaz

We have 9 years to SP age.
I start getting a DB pension at the end of 2025 (age 60)  that will go straight into our Sipps while I’m still working. 
My 2 Sipps now hold all my previous DC pensions.  She has a Sipp that’s only been going a few years. 

I plan to retire in perhaps 6 years but I could carry on part time if I wanted,  going self employed has already let me cut my hours and take more holidays. 

I plan to take a mixture of tax free cash and UFPLS for 3 years to SP age and for her to just do the £2880 jig every year to preserve her Sipp. 

If she survives me then she will only get half my DB so we have life insurance to age 75 to act as a buffer if needed.