Is it worth getting a pension?

trickydicky14 · 14 January 2020 at 9:15PM

Is it still worth getting a pension?
My partner has no personal pension, is self- employed part time and will receive a full state pension in 2030.
She earns around 11k before tax and gets in the region of 6k from a small rental property.
Has cash savings of about 50k.
I feel she still has time to accumulate a small private pension, but struggle to advise her as I have an NHS pension which I fell into and has paid off without any intervention from me so my knowledge is limited.
Would she be improving her future if say she just started a stakeholder pension with the likes of Cavendish and let them sort it out? Would you say the fees are reasonable?
She would be happy to pay in most of her wages and her rental income if that is allowed? And live of her savings for a few years and I could help her out if need be.
I believe she can amend her payments to fit around her cost of living with this type of pension?
Surely this has got to be an ok step to make if she pulls her finger out and does it now?

Dazed_and_confused · 14 January 2020 at 9:30PM

Is it still worth getting a pension?

Yes. From what you have posted it won't save her any personal income tax but if she contributed say £2,000 to a relief at source pension scheme (personal pension, stakeholder of SIPP) then the pension company, courtesy of HMRC, will add £500 basic rate tax relief giving her a fund of £2,500.

My partner has no personal pension, is self- employed part time and will receive a full state pension in 2030.
She earns around 11k before tax and gets in the region of 6k from a small rental property.

She would be happy to pay in most of her wages and her rental income if that is allowed?

What wages? Rental income can be used to fund the contribution but cannot be used when establishing how much she can contribute.

xylophone · 15 January 2020 at 12:02AM

What wages?

I think the OP means her income from her self employment - about £11000 per annum apparently.

Dazed_and_confused · 15 January 2020 at 12:05AM

I think they probably mean that as well.

But experience has shown that it could just as easily be that she isn't self employed at all but is the director of a limited company hence the reference to "wages".

Which would make a significant difference to the pension contribution options.

Dox · 15 January 2020 at 12:16AM

trickydicky14 wrote: »

Is it still worth getting a pension?

Would she be improving her future if say she just started a stakeholder pension with the likes of Cavendish and let them sort it out?
Surely this has got to be an ok step to make if she pulls her finger out and does it now?

If she wants to improve her savings for later life in a tax efficient manner, the answer to all the above questions is 'yes'.

This might be useful: https://www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension/midlife-review-for-self-employed-people

xylophone · 15 January 2020 at 12:33AM

https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/tax-relief-members-contributions/#section-6

The levels of tax relief available depend on the member's relevant UK earnings in the current tax year.

These are the earnings available to base a pension contribution on. Generally, all earned income is relevant earnings.

It’s sometimes easier to think about what are not relevant earnings and this includes pension income, dividends and most rental income.

rental income is generally not relevant earnings but some rental income may be included if it is in respect of UK or EEA furnished holiday lettings business

for self-employed individuals, their relevant earnings are profits calculated over their chosen period of account. This does not need to align with the tax year ie 6th April to 5th April.

Thus if your wife's profits were say £10,000, she could make a payment of up to £8000 to a personal pension/SIPP/stakeholder and the pension provider would claim up to £2000 from HMRC and add it to her pot.

trickydicky14 · 15 January 2020 at 12:14PM

Thank you for your replies so far,
Firstly, can I clear one thing up, my partner is not a director of a company. She just works in a shop part time on a self- employed basis, gets paid gross and she sorts out her own tax and NI via her annual tax return.
Thanks for the links above.
Her rental property has been rented out to a family for the past three years so it is not a ‘holiday let’.
So, I think you are saying the money from that cannot be included in a pension contribution.
Regarding her wage from shop work, am I correct in saying she can contribute up to 100% of that ‘gross’ to a pension.
What would you think is an acceptable charge for managing a stakeholder pension?
Thanks for any help you can give.

JoeCrystal · 15 January 2020 at 12:20PM

trickydicky14 wrote: »

Thank you for your replies so far,
Firstly, can I clear one thing up, my partner is not a director of a company. She just works in a shop part time on a self- employed basis, gets paid gross and she sorts out her own tax and NI via her annual tax return..

That is interesting! It might be worth checking with HMRC to see what is the situation on her status.

xylophone · 15 January 2020 at 12:38PM

Regarding her wage from shop work, am I correct in saying she can contribute up to 100% of that ‘gross’ to a pension.

See post 6 above - it appears that she is on Self Assessment so presumably HMRC are content with the employment/self employment status?

The amount that can be contributed to a PP/SIPP/stakeholder and qualify for tax relief is explained in links above.

The individual pays the pension provider the net amount and the provider claims the tax relief which brings it up to the gross.

atush · 15 January 2020 at 7:19PM

Yes, it is worth getting a pension. 100 into her pension will cost her only 80.

Is it worth getting a pension?

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