Best use of wifes SIPP

Dunky62

Hi Folks

I am retiring at my DB Scheme,s NRA of 63 in Feb.Will then have a combined DB income of £50k and a TFLS of over £200k.I have been taking an old DB for the last 18months and using it for AVC contributions, hence the large TFLS. If I die, my wife gets 2/3 of my present scheme and 1/2 of my old scheme.

My wife is finishing work with Local Gov at 62 and will be able to get her CARE pension unreduced at 67 of about 4 or 5k.

We have built up a little SIPP over the last 3years for my wife and it is worth 100k at the moment. Therefore between now and her State Pension age we could utilise her Personal Allowance and get quite a lot out of her SIPP. ( more than we need )

What we are thinking is , we have 2 children who will not have the pensions we have and would a good use of some of my wife,s  SIPP be to give them each £300 a month to put in their own SIPP.and get the tax uplift.   We will also be looking at the marriage allowance  and also putting in the £2880 until age 75.  We will both get a full State Pension at 67.

Any thoughts? 

Albermarle

Sounds like a plan.
How old are the children? Do they have any employment income?
They may appreciate money they can access earlier, for a car, house deposit, Uni fees etc. Maybe you are planning for that separately?

Dunky62

Hi Albermarle

1 son is 28 and working earning less than £30K. 1 daughter is 31. Has been working for NHS as medical secretary for about 18months. Also less than 30k.

Yes , A good bit of the TFLS will be heading their way as and when required!!

Thanks

Albermarle

Dunky62 said:

Hi Albermarle

1 son is 28 and working earning less than £30K. 1 daughter is 31. Has been working for NHS as medical secretary for about 18months. Also less than 30k.

Yes , A good bit of the TFLS will be heading their way as and when required!!

Thanks

Ok as they are earning money at that level, then should be no problem for them to add £300 a month to a DC pension/SIPP ( same thing really).
If the son has a workplace pension it might be easier just to add more to that.
If the daughter is in the very good NHS pension scheme, then maybe it would be possible to buy more pension in that, which could work out better, but I am not that familiar with NHS pension rules.

leosayer

Sounds like a good plan....and good planning to get yourselves there.

Is your wife age 62 now? If so then if she intends to drain her SIPP before age 67 then she won't be able to avoid paying basic rate tax.

Once her state and local gov pensions start to be paid, she will be firmly into basic rate tax territority unless future governments raise the personal allowance significantly.

As a result it might be an idea for your wife to pay some basic rate tax now if that suits your gifting strategy.

Also, given that your wife's income is excess to requirements then it may be worth you following the process for recording gifts out of surplus income to mitigate inheritance tax exposure as described on the link below:
https://techzone.aberdeenadviser.com/public/iht-est-plan/gifts-out-of-surplus-income

Triumph13

If there is still time before she stops work, it would be worth your wife contributing to LGPS rather than a SIPP as these could be taken tax free leveraging the DB part.

Dunky62

Hi Triumph. We have also built up an AVC, currently worth 27k as part of LGPS. As she approaches 67 the pension should increase enough for her to get it all tax free.

Thanks

Brie

So in her own right your wife will have maybe £4k a year from her work pension and ??  £12K+ from the state pension?  So maybe £16k total.  

So your DB schemes include a widow's pension so she will be getting another £35k+.  But will that be sufficient if she needs care?   The total would currently barely cover care home costs if she has a very inexpensive place.

Why is your wife expected to give ££ to the children but not you?  

Dunky62

Good point. I suppose if i go first and she needs funds for care, then the house( worth 500k at moment ) would have to be sold.

Dunky62

One other thing I could do when I get my retirement pack is see how much it would cost to increase the spousal pension to 100%. As i could be borderline 40% tax it may also allow the use of the Marriage allowance?