State pension : pensioner supporting younger wife

margaretclare

EdInvestor wrote: »

Age allowance is progressively withdrawn at a punitive rate after income gets to around 21k, until it reverts to the normal personal allowance.

Thus say if a (traditional) retired couple gets a total joint pension income of 28k, of which 3k is in the wife's name and 25k in the husband's name, they will pay around 2-3k more tax than if the income was split 7k under the wife's name and 21k under the husband's name, using the wife's full age allowance and avoiding age allowance clawback from the husband.

Over the next couple of years the age allowance is going up from around 7k per person to around 10k per person so that a couple over 65 will have be able to have tax-free income of 20k - but only if they both use their allowances to the full.

So it will make good sense to equalise taxable incomes between spouses up to the 10k level where possible - for instance by making additional pension contributions into a plan for the spouse with a low projected taxable retirement income, rather than contributing to a larger pension for the bigger earner in the latter working years.

Or consider a couple like myself and DH.

We each have full state retirement pension from our own contribution records. He has quite a lot of SERPS because he was never contracted out into an employer's scheme. He also has an annuity which was bought with his 'golden goodbye' when his company folded. I have annuities and some SERPS. We have approx the same each and it adds up to nearly £25K. We each have a personal age-related tax allowance and we have the married tax allowance which is split between us to set against our individual income. We pay a tiny amount of tax, but from next tax year I don't think we'll be paying any at all.

Thank goodness, the days have gone when he would have been written to by the tax office about my tax affairs, as used to happen.

Margaret

seven-day-weekend

EdInvestor wrote: »

Age allowance is progressively withdrawn at a punitive rate after income gets to around 21k, until it reverts to the normal personal allowance.

Thus say if a (traditional) retired couple gets a total joint pension income of 28k, of which 3k is in the wife's name and 25k in the husband's name, they will pay around 2-3k more tax than if the income was split 7k under the wife's name and 21k under the husband's name, using the wife's full age allowance and avoiding age allowance clawback from the husband.

Over the next couple of years the age allowance is going up from around 7k per person to around 10k per person so that a couple over 65 will have be able to have tax-free income of 20k - but only if they both use their allowances to the full.

So it will make good sense to equalise taxable incomes between spouses up to the 10k level where possible - for instance by making additional pension contributions into a plan for the spouse with a low projected taxable retirement income, rather than contributing to a larger pension for the bigger earner in the latter working years.

I understand what you have said, but how is it done?

When we are both receiving all our pensioons by 2014, my husband will have around 12.5k and I will have around 7.5k. (working on today's figures), Obviously he will have to pay tax and I won't. How can we even it up so that neither of us do - have £10k each in other words?

At the moment all we receive is my husband's Teachers' Pension and his Incapacity Benefit. I will receive my State Pension in January 2010, my husband will receive his State Pension in January 2014 (but will lose his IB) and I will receive my Local Governmemt Pension in August 2014.

I have a feeling we should have perhaps have done it already.....

EdInvestor

seven-day-weekend wrote: »

I understand what you have said, but how is it done?

Are you likely to have income from letting your properties?That money could be put in your name, so as to reduce tax.

Another method is to commute more of the "better paid" partner's pension into cash and then turn the lump sum into a pension/ annuity for the spouse with the unused allowance.May be too late for that one now though.

seven-day-weekend

Yes, Edinvestor, the 'income' from our English property is already in my name although I have never made more than about a couple of grand a year from it as the rents are inclusive of bills- tax people do know about this.

If we ever rent the Spanish property (we live here full-time at the moment so don't), I think Spanish tax law says it has to be in both our names.

Actually, if we stay Spanish Tax Resident it will be much better for us taxwise, as they do not include his Teachers' Pension which has to remain liable to British Tax, and therefore he benefits from personal tax allowances in both countries.

But we'd like to return to the UK at some point.

I don't think we can convert my husband's Teachers' Pension into cash.

Sorry for taking the thread off-topic.

EdInvestor

bryanb wrote: »

Yes a woman can claim for a dependent exactly the same. The dependent may have income up to around £58 (please check exact figure) After that amount no allowance is payable.Hopefully this thread will help a few people to get their entitlement. The pension service is very reluctant to give advice, in fact they denied it existed 2-3 times to me.

Unfortunately this isn't the case. :mad:

Although a man can claim a dependant's allowance for a wife under state pension age with no conditions, a woman has to have been claiming incapacity benefit before retiring - AND clamining an addition for the dependant husband.

This looks like blatant discrimination to me.

http://www.ageconcern.org.uk/AgeConcern/Documents/FS19STATEPENSIONAPR07.pdf

2.3 Dependant husbands
If you are a married man and your wife is receiving a state pension she
may be able to get an increase for you of up to £52.30. This won’t be
paid if you earn more than £59.15 a week (£52.30 if you don’t live with
your wife). But she can only get this increase if she was receiving
Incapacity Benefit with an addition for you immediately before she starts
to draw the State Pension. Your wife will not get an increase if you have
a State Pension or certain other benefits of £52.30 or more.

Disgraceful.

bryanb

Sterlingtimes post No 17 which quotes from the Pensions Act seems at odds with this. Personally I would rely on The Pensions Act rather than Age Concern. I do respect Age Concern but they can make mistakes. The Pension service denied the allowance 3 times to me including a supervisor, I now receive the allowance.

bryanb

Having looked more closely at post 66 I have realised that what is referred to here is an increase of pension. We have been discussing an Allowance ( which ca be stopped if dependant's income increases)

seven-day-weekend

http://www.thepensionservice.gov.uk/atoz/atozdetailed/adult-dependency-increase.asp

Found this information whilst looking for something else - seems with the new rules, anyone claiming State Pension after 6th April 2010 will no longer be able to get this allowance.

Thought it was important enough to resurrect the thread to point it out.

ALIBOBSY

My understanding was that this allowance was brought in to support a younger wife until she reached 60. It was aimed at couples where the husband was older than the wife (used to be fairly common in the 50's 60's).It was assumed that if the husband was younger than the wife he would continue to work (or sign on jsa-is the same rate as the allowance).
Like the old style widows benefit (which used to be payable to women only) this legislation came from a different era. The whole point of the new legislation is to clear up all the areas, but as in any change some people win, some people lose.
Now the new regs even up the retirement ages would it be fair to pay an allowance to support the partner of someone till they reach retirement age them selves. They would continue to work or claim benefits as appropriate. Plus the new regs reduce the number of years required to get a FULL pension down to 30, which means many more will get a higher amount when they retire.

I have more of an issue with retirement ages being raised myself, but that might be because I can't retire until age 67 .

ali x

ALIBOBSY

seven-day-weekend wrote: »

I do think that after a while (a year maybe?) a fit healthy widow of non-pensionable age should look for work, unless she has young children, or looks after elderly relatives, or has some other genuine reason such as sickness not to.

Obviously she should be supported by the State whilst she is looking for work, as otherwise she would have no means of support, but this case is different to those mentioned above, inasmuch as she will be looking for work.

IMHO, if someone is not bound by family commitments, or does not have a sickness or disability that prevents them from working, is not of retirement age and is not looking for work, I do not think they should receive State Benefits.

If they have other means of support (such as a husband/partner) then that's fine, they don't have to work if they don't chose.

This is what happened after widows benefit was revised to bereavement benefit (after some men took the issue to europe as discriminatory). The new benefit is payable to both sexes, but if you do not have kids you get a max of 1 yr. Then you would be expected to sign on for work, or if have ill health claim the appropriate benefit.

ali x