Third Party Pension Contribution to Daughter

fergusonsfolly

I want to make a regular Third Party Pension Contribution to my adult Daughter's SIPP.

The SIPP is with one of the major providers.

The contribution would be a regular "gift" out of my excess income, so would not be affected by any IHT issues.

I do not want to make the contribution direct to her own current account, as I am concerned that some of the contribution would be spent on new iphones, handbags, holidays, etc.

By making a third party contribution I could elimininate these concerns.

I am aware that I would not receive any tax relief on the contribution, but that she would be the beneficiary of the tax relief.

Her SIPP provider says that I cannor make such a contribution, however, there is much information on the internet saying that it can be done.

Is anyone aware of any SIPP providers that allow this?

leosayer

I made a contribution to my son's HL SIPP using my debit card some years back, however he had to be logged in for me to do it.

QrizB

I think the problem is that third party contributions don't receive tax relief at all. (Happy to be corrected if I've got this wrong.)

Edit: I was wrong and I've been corrected.

If you want your daughter to receive tax relief, you need to make an unconditional gift to her and then trust her to pay it into the pension. This means transferring it into her current account and accepting the risk that "some of the contribution would be spent on new iphones, handbags, holidays, etc."

That's what I do with my kids. They get a monthly sum which I hope they contribute to their pensions but I have no control over what they actually do with it.

NoMore

What your legally allowed to do and what any particular pension provider will allow you to do are not necessarily the same thing.

Third party pension contributions

Yes you can do it, but also you may need to get your daughter to open an account with a provider that also supports it.

NoMore

Who can pay into your pension

Vanguard allow it but both you and your daughter have to have a Vanguard account, no idea why because it's not being paid directly from a balance in the account but via debit card associated with the account. Guess it's there way of record keeping and KYC

NoMore

https://forums.moneysavingexpert.com/discussion/comment/81943013#Comment_81943013

No they are allowed and tax relief is due based on the recipient, see the link in my previous post.

Exodi

https://forums.moneysavingexpert.com/discussion/comment/81943023#Comment_81943023

Plus they also claim tax relief:

Payments from another Vanguard account

Other Vanguard account holders can pay into your pension. You will need their full name and Vanguard account number. We can only accept debit card payments.

In your online account go to Invest now and follow the steps. Select third party as the person paying in.

Once submitted, we'll send a payment request to their Vanguard account. They then log in to complete by debit card. It will take 1 working day for the payment to clear.Third party contributions also receive tax relief and count towards your annual allowance.

https://www.vanguardinvestor.co.uk/need-help/answer/who-can-pay-into-my-pension

The only annoying thing about Vanguard is if the OP's daughter doesn't use them otherwise, their charge structure can be quite punitive for those with small balances.

NoMore

https://forums.moneysavingexpert.com/discussion/comment/81943036#Comment_81943036

Just the first one I found that supported it, the OP needs to contact each provider they might wish to use and confirm. It's a good example of it being possible and how it works, as some people were unaware of how tax relief works in this situation.

dunstonh

I am aware that I would not receive any tax relief on the contribution, but that she would be the beneficiary of the tax relief.

Third-party payers still result in basic tax relief. The pension holder gets it. Not the payer.

Her SIPP provider says that I cannor make such a contribution, however, there is much information on the internet saying that it can be done.

I'm surprised a SIPP provider wouldn't allow it, but then nowadays, even basic plans claim to be a SIPP. Another reason could be if you are using a low-cost or niche player. They are often more limited in functionality.

Remember that what a provider decides to offer in terms of functionality is different to what can be offered generically.

Albermarle

OP,

I am sure you are aware, but when you find a provider to facilitate third party contributions, they will automatically claim basic rate tax relief from HMRC on all contributions received, and add it to her account when they receive it.

It is the pension holders responsibility to not get more tax relief than they are entitled, by not adding too much to the pension.

To add more than £2880 per tax year ( and get £720 tax relief) , she needs to have employment income in excess of £3600. If she has employment income, then it begs the question of is she already contributing to a workplace pension?

wjr4

Is there a reason you want to put into a pension instead of helping in other ways eg property deposit? Just out of interest