Advice on a pension for my wife

prowla · 17 February 2010 at 10:46AM

I want to set up a personal pension for my wife, with an initial lump sum of £6k, and then a small regular monthly payment to keep it ticking over but the option to make ad-hoc contributions in from time to time.

It would be great to get some advice on this and suggestions for options - thanks in advance.

dunstonh · 17 February 2010 at 11:29AM

It would be great to get some advice on this and suggestions for options - thanks in advance.

pensions advice is regulated and the board isnt authorised to give that advice. Just discussion and comment only.

Also, it would be impossible to give advice, even if it was allowed, as we dont know how you want to invest, how you would purchase it, what features you want, what future sustainability to regular payments would be, how you you are, how much you want to pay, when you want to take benefits, how you want to take benefits plus many others.

Generically, the stakeholder pension is the most flexible for payment options. It is the simple option with a limited fund choice and some restrictions. Designed for the person that doesnt know what they want or what they are doing. Pricing has a cap but its not necessarily the cheapest. However, all the other options are benchmarked on price against the stakeholder. Personal Pensions have a larger fund choice. Some are priced in exactly the same way as stakeholder on the same funds but have a greater range (the extra range will usually cost more if used but you can mix and match). Others are priced so they are competitive with single premiums and longer terms or consistent regular premiums (meaning they are usually uncompetitve when not matching that criteria). SIPPs are the most advanced option. Typically the most expensive option as well for funds although if you are using direct investments (shares, ITs etc) then they can provide good value. They do require more work though.

prowla · 17 February 2010 at 12:23PM

(Obviously I meant suggestions/comments/thoughts rather than formal financial advice answerable in a court of law!

)

Thanks for the summary - that is helpful.

We have the initial £6k to get started, and then want to put in £20-100/month, probably looking at retiring in 20 years time.

zygurat789 · 17 February 2010 at 12:24PM

There's the small matter of tax relief. With a stakeholder pension, doesn't the govt stick £792 into the pension for each contribution of £2808 pa (Is this per tax year) If it is a tax year then for a contribution of £5616 either side of April 5 you could have a pension fund of £7,200. If the wife isnt working how would you get tax relief on the £6,000?

dunstonh · 17 February 2010 at 12:41PM

We have the initial £6k to get started, and then want to put in £20-100/month, probably looking at retiring in 20 years time.

anything less than £100pm gross and you are more or less limited to stakeholder. £100pm plus and the personal pensions start to come into play.

tax relief applies to all versions of the pensions that are available.

It is also worth noting that you should aim to balance your retirement provision between you and your spouse to ensure you are not top heavy in one name. So, depending on your provision and what type it is, it may be worth moving future contributions to hers. If you have an occ scheme or you are a higher rate taxpayer or you have a scheme with guarantees then it will usually not be worth it but you should check it out.

At 65, one person in the house earning £20k pays £2k tax. A couple earning £10k each pay no tax. Thats a saving of £2000 a year for life just because the direct debit was set up differently.

zygurat789 · 17 February 2010 at 1:15PM

Projecting on from 7 years of actual stakeholder performance I calculate that you would receive a pension of either £1200pa on £20pm or £2800pa on £100pm. Although the age of your wife could alter this.
Even if you added this to the basic state pension of £5000 it still leaves you short of the target, the maximum tax free income of £9490.

ninky_2 · 17 February 2010 at 1:29PM

are you a basic or high rate taxpayer?

if basic rate it have you considered ISA rather than pension? you could do this with the amounts you are talking about. pensions are income taxed when you take them out and can't be left to others as inheritence etc plus you lose it if you die early. however, if you are a high rate taxpayer it's worth considering the benefit of the pension as you will effectively get a higher 'top up' from the govt.

dunstonh · 17 February 2010 at 1:51PM

pensions are income taxed when you take them out and can't be left to others as inheritence etc plus you lose it if you die early.

Sorry, that is wrong.

Pensions are taxable income but you have your personal allowance which allows taxable income up to that amount to be paid with no tax taken.

Also, pensions are not lost if you die early. The full fund value is paid out to your nominated beneficiary if you die before retirement. If you die after retirement it will depend on the options you choose to include (i.e. spouse protection, value protection (return of capital minus withdrawals)or guarantee periods or if you use income drawdown etc.

ninky_2 · 17 February 2010 at 3:40PM

dunstonh wrote: »

Sorry, that is wrong.

Pensions are taxable income but you have your personal allowance which allows taxable income up to that amount to be paid with no tax taken.

Also, pensions are not lost if you die early. The full fund value is paid out to your nominated beneficiary if you die before retirement. If you die after retirement it will depend on the options you choose to include (i.e. spouse protection, value protection (return of capital minus withdrawals)or guarantee periods or if you use income drawdown etc.

so can you nominate anyone as your beneficiary? a friend for example? or can you choose to leave some of your pension to a charity, and some to a friend and some to a sibling? all these are options with ISA savings / the rest of your estate but not when it comes to a pension AFAIK.

yes i am aware you have your tax free allowance just as you do with regular income, but anything above this is taxable. and the tax free allowance is only about 9k a year isn't it?

i realise there are benefits and downsides to both and i'm no expert. but quite an interesting article here.

http://www.thisismoney.co.uk/pensions/article.html?in_article_id=494818&in_page_id=6

EdInvestor · 17 February 2010 at 4:36PM

ninky wrote: »

so can you nominate anyone as your beneficiary? a friend for example? or can you choose to leave some of your pension to a charity, and some to a friend and some to a sibling?

The trustees make the final decision but will usually follow your wishes unless you do something peculaiar like ignore spouse or dependants.The money is outside the estate and tax free.This applies to private pensions.

Occupational pensions will be subject to scheme rules.

prowla · 17 February 2010 at 4:59PM

Thanks for the further comments - I'm getting useful ideas.

Work has been a bit patchy over the past 6-8 months, but I'm just about to start a job that will put me in the higher rate, but it might not make the threshold for this year (2009-10).

The new job will have a pension plan for me, and I have a few dormant ones from previous employment.

Advice on a pension for my wife

Comments

Confirm your email address to Create Threads and Reply

🚀 Getting Started

Categories

Is this how you want to be seen?

Get our FREE Weekly email full of deals & guides - and it’s spam-free