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    • NorthernGeezer
    • By NorthernGeezer 5th Mar 18, 11:57 AM
    • 111Posts
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    NorthernGeezer
    No Pension
    • #1
    • 5th Mar 18, 11:57 AM
    No Pension 5th Mar 18 at 11:57 AM
    My wife dosn't have a pension, works part time and earns 8k pa but has access to 60k in savings.
    Can she start a pension with this 60k or are there tax implications?
Page 1
    • MallyGirl
    • By MallyGirl 5th Mar 18, 12:04 PM
    • 2,677 Posts
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    MallyGirl
    • #2
    • 5th Mar 18, 12:04 PM
    • #2
    • 5th Mar 18, 12:04 PM
    you can't contribute more to a pension than you earn but she could gradually pay the 60k into a pension at 8k per year. She would get tax relief on the full 8k even though she won't have paid any tax. Well worth it
    • GunJack
    • By GunJack 5th Mar 18, 12:08 PM
    • 10,108 Posts
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    GunJack
    • #3
    • 5th Mar 18, 12:08 PM
    • #3
    • 5th Mar 18, 12:08 PM
    Also worth getting her an up-to-date state pension forecast - some of the 60k might be better spent topping up her NI years if required.

    https://www.gov.uk/check-state-pension
    ......Gettin' There, Wherever There is......
    • NorthernGeezer
    • By NorthernGeezer 5th Mar 18, 12:19 PM
    • 111 Posts
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    NorthernGeezer
    • #4
    • 5th Mar 18, 12:19 PM
    • #4
    • 5th Mar 18, 12:19 PM
    She already has a pension statement which details she gets a full pension entitlement at 66.
    Any thoughts on a provider for this amount over a period of 3 years?
    • ProDave
    • By ProDave 5th Mar 18, 12:33 PM
    • 844 Posts
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    ProDave
    • #5
    • 5th Mar 18, 12:33 PM
    • #5
    • 5th Mar 18, 12:33 PM
    Another point slightly off topic.

    If she only earns 8K it would be worth while transferring part of her tax allowance to you via the marriage allowance that would reduce your tax bill a little without affecting her position.
    • NorthernGeezer
    • By NorthernGeezer 5th Mar 18, 12:52 PM
    • 111 Posts
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    NorthernGeezer
    • #6
    • 5th Mar 18, 12:52 PM
    • #6
    • 5th Mar 18, 12:52 PM
    Already done that ProDave but thanks for the 'heads up' for anyone else
    • lisyloo
    • By lisyloo 5th Mar 18, 1:11 PM
    • 21,833 Posts
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    lisyloo
    • #7
    • 5th Mar 18, 1:11 PM
    • #7
    • 5th Mar 18, 1:11 PM
    I can only see downsides to putting this in a pension over putting it in an ISA such as

    1) subject to income tax when withdrawn
    2) subject to any laws and tax bands at the time
    3) Can't withdraw until at least 55

    Am I missing something?
    • NorthernGeezer
    • By NorthernGeezer 5th Mar 18, 1:27 PM
    • 111 Posts
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    NorthernGeezer
    • #8
    • 5th Mar 18, 1:27 PM
    • #8
    • 5th Mar 18, 1:27 PM
    Thanks for the reply lisyloo.
    Its a short term requirement for 3 years till she retires and gets her state pension.
    Given the above it looks like she can only deposit 6400 pa of her own cash in to a pension as she will get the 20% tax break (1.6k) from HMRC.
    After 3 years she will have 24k in the pot, take her 25% tax free amount leaving her 18k.
    She will withdraw this as needed to top up her state pension, keeping her under her tax threshold.
    When she's retired she will still contribute the 2880 amount to get the tax break.

    Its a no brainer as far as I can see, or am I missing something.
    • Audaxer
    • By Audaxer 5th Mar 18, 1:43 PM
    • 1,042 Posts
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    Audaxer
    • #9
    • 5th Mar 18, 1:43 PM
    • #9
    • 5th Mar 18, 1:43 PM
    Thanks for the reply lisyloo.
    Its a short term requirement for 3 years till she retires and gets her state pension.
    Given the above it looks like she can only deposit 6400 pa of her own cash in to a pension as she will get the 20% tax break (1.6k) from HMRC.
    After 3 years she will have 24k in the pot, take her 25% tax free amount leaving her 18k.
    She will withdraw this as needed to top up her state pension, keeping her under her tax threshold.
    When she's retired she will still contribute the 2880 amount to get the tax break.

    Its a no brainer as far as I can see, or am I missing something.
    Originally posted by NorthernGeezer
    You are right, it is no brainer, especially as she will be under her personal tax allowance when she starts to draw it out, so effectively the tax relief is free cash.

    Is she planning to leave it as cash in the SIPP or invest it? If she is only planning to withdraw relatively small amounts to top her State Pension, I think it would make sense to invest it so that it lasts throughout her retirement.
    • NorthernGeezer
    • By NorthernGeezer 5th Mar 18, 2:02 PM
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    NorthernGeezer
    That's the plan Audaxer.
    Probably invest it in a SIPP, I'm thinking with HL as they seem to have a good reputation.
    Her pension statement is for 153 per week (7956pa) allowing her to withdraw around 3.5k pa before hitting her tax threshold.
    • lisyloo
    • By lisyloo 5th Mar 18, 2:04 PM
    • 21,833 Posts
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    lisyloo
    Its a no brainer as far as I can see, or am I missing something.
    Nope you are right. I missed the tax break. Cheers.
    • NorthernGeezer
    • By NorthernGeezer 5th Mar 18, 2:07 PM
    • 111 Posts
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    NorthernGeezer
    I'm assuming I've got to be quick with this though, by the end of this month to get this years tax break.
    • Mnd
    • By Mnd 5th Mar 18, 7:18 PM
    • 503 Posts
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    Mnd
    I think you will have plenty of time as long as you get on with it.
    Don't forget that if you are a tax payer when your wife retires you can still use the transferable tax code thing I think
    • Dazed and confused
    • By Dazed and confused 5th Mar 18, 8:09 PM
    • 2,557 Posts
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    Dazed and confused
    Her pension statement is for 153 per week (7956pa) allowing her to withdraw around 3.5k pa before hitting her tax threshold.

    Unless she cancels her application for Marriage Allowance this would result in her having approx 221 to pay in tax (current year).

    So you probably need to consider whether she should take the income you suggest and pay the tax.

    Or take the income and cancel the Marriage Allowance but then you pay 230 more in tax.

    Or take a slightly reduced amount of the SIPP.

    She also needs to take care in the year she starts to get her State Pension as any overlap with payment of wages from her job (I assume from your posts that she would be stopping work when State Pension kicks in) would make her income more than might otherwise be expected for that year.
    • NorthernGeezer
    • By NorthernGeezer 5th Mar 18, 8:31 PM
    • 111 Posts
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    NorthernGeezer
    I already claim her share of the marriage allowance but as I'm finishing work at the end of this April i'll give it her back in time for when she crunches the numbers against her state pension.
    Until that time (October 2021) she'll be putting 100% of her salary in to the pension.
    Now all i need to do is find a suitable SIPP
    • Audaxer
    • By Audaxer 5th Mar 18, 9:25 PM
    • 1,042 Posts
    • 602 Thanks
    Audaxer
    That's the plan Audaxer.
    Probably invest it in a SIPP, I'm thinking with HL as they seem to have a good reputation.
    Her pension statement is for 153 per week (7956pa) allowing her to withdraw around 3.5k pa before hitting her tax threshold.
    Originally posted by NorthernGeezer
    Do you mean she is going to pay in 8k per year for 3 years investing it in funds, and then drawdown 3.5k per year when she retires in 3 years time, at which time she will pay 2,880 back in per annum to get the tax relief?
    • NorthernGeezer
    • By NorthernGeezer 5th Mar 18, 10:33 PM
    • 111 Posts
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    NorthernGeezer
    Got it in 1
    • NorthernGeezer
    • By NorthernGeezer 6th Mar 18, 11:10 AM
    • 111 Posts
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    NorthernGeezer
    You will need to explain the reasoning behind that statement shreya please.
    • NorthernGeezer
    • By NorthernGeezer 9th Mar 18, 1:08 PM
    • 111 Posts
    • 19 Thanks
    NorthernGeezer
    Fidelity or HL SIPP?
    Anybody got any thoughts given the relatively small annual amount to invest?
    I'm expecting a greater return from the tax break than the investment.
    • LHW99
    • By LHW99 9th Mar 18, 8:28 PM
    • 1,280 Posts
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    LHW99
    I think HL don't charge if you leave the money as cash, but you have to keep the SIPP open for at least 12 months.
    They are good on customer service, and generally not too bad charges-wise for smaller amounts whatever you invest in.
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