Financial Planning

Intel1982

It's a Christmas bonus that he gets every year, it's gradually gone up over the years and it has been £7.5k for the past three years. We don't know until the wage slip comes in what he'll be getting every year but I think within the next year or two they'll up to £10k. Its quite a stressful job he has and it's a small private company so think it's their way of rewarding him for sticking with the job/company.

QrizB

Ok, so simply paying extra to your pension every month risks you not receiving as big a bonus as you hoped.

What he could do instead is open a separate personal pension that he can pay into on an ad-hoc basis. Towards the end of the tax year, after receiving the bonus, he can then pay in a lump sum big enough to bring his adjusted pay down under £50k (or, if that isn't affordable for you as a family, as much as you can). When he submits his tax return he'll have less tax and HICBC to pay.

PS my congratulations to hubby on going from minimum wage to being in the top 20% of UK earners! Hope the stress remains manageable.

Albermarle

My husband has a LISA that he opened when he was 39, should we be contributing into this? Should I be opening a LISA and/or SIPP for myself? I have no pension at all. 

It seems clear from previous posts that your husband would be better off making higher pension contribution than adding to a LISA, as there will be the added benefit of not having to pay some of the child benefit back in tax.

For you it could be either/or.

LISA means you can add up to £4k pa and get £1k bonus added to it ( up until age 50) . Funds would be available tax free at age 60. You have to open it before you are 40

Pension means ( as a non earner) you can add £2880 and get £720 added. Funds would be available at around 57/58 and possibly taxable. You can add funds at any age.

Regarding the dilemma of paying off the mortgage quicker vs pension, I do not think you mentioned the interest rate on the mortgage and if it is fixed for a period. It is important in working out the best thing to do.

Albermarle

A few comments:
*What does your and your partner state pension look like. Have you been claiming your SP while child caring?

The OP is getting Carers allowance, which automatically means they will get NI credits towards State Pension.

Simon11

Ask your partner to request that the bonus is paid into his pension. Easy way to monitor and keep just under £50k.

Otherwise, the reality is that he only keeps less than 40% of his bonus through extra tax payments and loss of child benefit!

Intel1982

Our mortgage is mixed until March 2024 - we are currently on 3.99%.  Have a good bit of equity from overpaying but we would like to get a bigger house soon and that would mean bigger mortgage and  interest rate. 

If I have both a LISA and a SIPP while I receive tax top up on both?

Thanks again for everyone's help. 

MallyGirl

you will get the tax top up on both SIPP and LISA if you can find the funds to put in them

daveshep26

MallyGirl said:

you will get the tax top up on both SIPP and LISA if you can find the funds to put in them

I'm beyond age bracket for LISA (so not speaking from great knowledge) - but I didn't think its '25%' on contributions was anything to do with tax (albeit the identical rate) - isn't it just a government approved bonus?  

powerspowers

PS my congratulations to hubby on going from minimum wage to being in the top 20% of UK earners! Hope the stress remains manageable.

Which definitely wouldn’t have happened if he were responsible for homeschooling 2 disabled children. So well done both of you. 

Lots of sensible suggestions here. For me I’d be aiming to get on an more equal footing in terms of pensions, recognising the contributions you both make. So starting a pension yourself and opening a Lisa. Also agree with increasing husbands pension to reduce CB repayments. All these seem higher priority than mortgage, assuming it’s not humongous 

MallyGirl

daveshep26 said:

MallyGirl said:

you will get the tax top up on both SIPP and LISA if you can find the funds to put in them

I'm beyond age bracket for LISA (so not speaking from great knowledge) - but I didn't think its '25%' on contributions was anything to do with tax (albeit the identical rate) - isn't it just a government approved bonus?  

Yes you are right- it is a bonus that is the same amount as you would get as a basic rate tax rebate if it was a pension