Private Pension or Workplace via Salary Sacrifice?

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  • michaels
    michaels Posts: 28,003 Forumite
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    The more you can equalise pensions the more tax efficient it will be in retirement. One route is a divorce in name only on retirement to split the pension pot but assuming you don't want to go down that route, at the very least you should be making annual pension contributions for your partner of 2880 which will be grossed up to 3600.
    I think....
  • kidmugsy
    kidmugsy Posts: 12,709 Forumite
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    Jaguar_Skills wrote: »
    We will get married ... It will probably be in the next 3 years or so.

    Just how far away is the Registry Office?
    Free the dunston one next time too.
  • Jaguar_Skills
    Jaguar_Skills Posts: 547 Forumite
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    kidmugsy wrote: »
    Just how far away is the Registry Office?

    That's a afair point. We did talk about the protection/tax benefits of just doing it quickly but she doesn't just want to get married for money.

    So we are just going to take the hit on it a bit and wait for a few years till we have the two kids and can plan the wedding in the Carribean.
  • Jaguar_Skills
    Jaguar_Skills Posts: 547 Forumite
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    michaels wrote: »
    The more you can equalise pensions the more tax efficient it will be in retirement. One route is a divorce in name only on retirement to split the pension pot but assuming you don't want to go down that route, at the very least you should be making annual pension contributions for your partner of 2880 which will be grossed up to 3600.

    Is it still tax beneficial even though shes not paying any tax and I am HRT?
  • Dazed_and_confused
    Dazed_and_confused Posts: 6,458 Forumite
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    She will get 20% relief at source (2880 paid becomes 3600 in the pension fund) and may pay no tax on the whole pension when taken whilst you could be paying 40/41% on yours.
  • Jaguar_Skills
    Jaguar_Skills Posts: 547 Forumite
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    Dazed_and_confused wrote: »
    She will get 20% relief at source (2880 paid becomes 3600 in the pension fund) and may pay no tax on the whole pension when taken whilst you could be paying 40/41% on yours.

    Thanks very much. What is the reason behind the £2,880 figure or is that a minimum?
  • MallyGirl
    MallyGirl Posts: 6,617 Senior Ambassador
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    if someone is not earning they can still pay £3600 into a pension. That includes the 20% tax benefit so the actual contribution you would make would be the £2880. So she gets 20% tax benefit from the tax man even though she hasn't paid any tax.
    You did mention that she has a limited company though - is that paying her anything?
    I’m a Senior Forum Ambassador and I support the Forum Team on the Pensions, Annuities & Retirement Planning, Loans
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  • Jaguar_Skills
    Jaguar_Skills Posts: 547 Forumite
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    MallyGirl wrote: »
    if someone is not earning they can still pay £3600 into a pension. That includes the 20% tax benefit so the actual contribution you would make would be the £2880. So she gets 20% tax benefit from the tax man even though she hasn't paid any tax.
    You did mention that she has a limited company though - is that paying her anything?

    It isn't because she isn't working anymore.

    It did before a bit, so we put a lump sum in through her pension but then she went on maternity and hasn't gone back/earned any money! :rotfl:
  • MallyGirl
    MallyGirl Posts: 6,617 Senior Ambassador
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    In that case definitely do the £3600 gross contributions - it gets 20% bonus going in and will probably all come out tax free.
    Yes, you would get 42% bonus going in to your pension but you could end up paying 40% tax on the way out too. Better to even the pensions out (even by a small amount) to reduce your pension tax bill.
    I’m a Senior Forum Ambassador and I support the Forum Team on the Pensions, Annuities & Retirement Planning, Loans
    & Credit Cards boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com.
    All views are my own and not the official line of MoneySavingExpert.
  • atush
    atush Posts: 18,726 Forumite
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    Jaguar_Skills wrote: »
    We will get married but just wanted to wait until after the birth of our second. It will probably be in the next 3 years or so.

    We do have a flat which we jointly own that has £150k equity in it so plus our current house with around the same in it she has a bit of a fall back

    But I understand the concern for her. She isn't going to go back to work as my wage will cover us both and so it is nice for her to be at home with our son.

    I guess the way it could work is I pay into a pension for her but then no salary sacrifice benefits unless her ltd company could in some ways do this.

    Do make sure you list each other in yur expression of wishes. as pensons ar outside your estate so she wont inherit it automatically.
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