Continue contributing to pension or something else?

dunstonh

Sounds like using your wife's £60k allowance and carry forward is available. (subject to company profits).

noitsnotme

https://forums.moneysavingexpert.com/discussion/comment/81891615#Comment_81891615

If I divert my contributions to her so she contributes double (and me nothing) it would still be less than £60k.

The question was really about is that more sensible than continuing to contribute to mine. Or is there another option entirely.

dunstonh

https://forums.moneysavingexpert.com/discussion/comment/81891633#Comment_81891633

If you are not utilising your wife's allowance and she is nowhere near the £1m, then using hers instead of yours is the logical option.

You get reduced benefit as you will be exceeding the LSA. Your wife is nowhere near it.

The investment risk differences are a discussion between you and your wife, and whether you have independent finances or linked finances. If your finances are linked and you don't care whose name the money is in (which is the most common scenario) then you need to adapt your risk profiles to take a "joint" view rather than an individual view.

DRS1

Have you and your wife been maxing out your contributions to ISAs? It may not be as tax efficient as pension contributions but it can give you both some flexibility.

noitsnotme

https://forums.moneysavingexpert.com/discussion/comment/81891800#Comment_81891800

We have some funds in ISAs (low 6 figure sum) but not been maxing them out, preferring the tax efficiency of employer pension contributions to get the funds out of the business.

We don’t draw much in wages from the company as we have fairly decent rental income from the two properties.

noitsnotme

https://forums.moneysavingexpert.com/discussion/comment/81891736#Comment_81891736

It is logical isn’t it. I probably should have considered it sooner. Dropped the ball on that one really.

Our finances are very much linked and we certainly should revisit her risk profile if we’re going to divert all contributions to her pension.

I take it there are no issues with the company contributing a fairly large sum to her pension and none to mine? As mentioned, we are both directors with a 50/50 shareholding.

dunstonh

I take it there are no issues with the company contributing a fairly large sum to her pension and none to mine? As mentioned, we are both directors with a 50/50 shareholding.

That is why I asked the question. 50/50 shareholding directors won't be looked at by HMRC in respect of pension contributions as long as the company can support the contributions through trade and profit.

Funding one spouse more heavily for commercial reasons (e.g. to use their AA and keep the other below LSA) is defensible if the level is still reasonable compared with their duties and the company’s profits.

Where the spouse is not a shareholder‑director and does little or low‑value work (company secretary, light admin, cleaner), HMRC are much more likely to challenge large employer contributions as not wholly and exclusively for the trade. So, you are not in that scenario.

Roger175

https://forums.moneysavingexpert.com/discussion/comment/81891556#Comment_81891556

Paying off the interest only mortgage is pretty much risk free. There's no 'probably' to consider. Without wanting to get into a debate about stock market bubbles, you could see a significant drop in anything you continue to plough into your pensions should there be a crash/correction (arguably due?). Given your very heathy overall position, this would be a nice safe consolidation move.

noitsnotme

https://forums.moneysavingexpert.com/discussion/comment/81892210#Comment_81892210

I often see both sides of the argument, many saying pay it off and equally as many saying keep the investments. I kind of took the middle ground by clearing one rental property mortgage and keeping the other. I paid off the larger, more expensive commercial mortgage.

I do keep considering paying it off but we are thinking about retiring early and would need to bridge a gap of up to 5 years (if we went now) before we can access the pensions. While that’s still undecided (I can’t shake the “one more year” syndrome at the moment!) I’m leaning more to not paying it off. As that gap decreases I’ll be more inclined to pay it off. I may even start to pay a chunk off each year and then clear whatever is left in 5 years time.

noitsnotme

https://forums.moneysavingexpert.com/discussion/comment/81892189#Comment_81892189

Thanks for clarifying, that’s good to know.