Would it be a good move to take the 25% TFLS?

kermchem

If your wife is earning this tax year then it is NOT recycling for you to take a tax free lump sum, gift it to her, and for her to put into her DC / SIPP 100% of her earnings this tax year, rather put in 80% and have HMRC add the other 20%. And if her generous company contribution of £50K next financial year is not her entire salary / earnings that tax year then repeat.

KevinTHFC

@kermchem
The company contributes £50K to her pension and pay her a £50K salary. Therefore I don't think that she is eligible for any HMRC contributions.

Aretnap

https://forums.moneysavingexpert.com/discussion/comment/81887534#Comment_81887534

Assuming the company pays the £50K as an employer contribution, it won't count towards the tax-relief limit. In principle she can still pay in £40K as a personal contribution and get £10K tax relief, though this would be dependant on her having enough unused annual allowance to carry over from previous years. (Employer contributions do count towards the £60K annual allowance).

https://www.gov.uk/guidance/check-if-you-have-unused-annual-allowances-on-your-pension-savings

KevinTHFC

@Aretnap
She does have enough unused annual allowance to allow a 40K personal contribution.👍️

KevinTHFC

I’ve tweaked my retirement plan slightly and would appreciate some sense‑checking.

Current thinking:

• Take the TFLS from my £500k DC pot, as any taxable withdrawals would be hit at 40%.
• Gift my wife £40k so she can contribute it to her pension using her unused annual allowance, with £10k tax relief added.
• Put £40k into our S&S ISAs this tax year and another £40k next tax year, leaving around £5k for a bit of fun money.

I realise the timings might be tight to get everything done before the end of the tax year, but aside from that, does this seem like a reasonable approach? Are there alternatives I should be considering?

Thanks for reading. I’m genuinely happy to be told I’m missing something obvious—I won’t be offended. Mostly I’m annoyed with myself for not thinking through the tax implications of withdrawing from my DC pot sooner.

KevinTHFC

Would love to see some input on this. Thanks in advance.

MallyGirl

seems like a reasonable plan