Small Lump Sum into Wifes pension?

[pauljdh]

We're thinking of paying £20K into the wife's pension fund, she's a basic rate taxpayer....with respect to tax relief, if we pay 20K in would, effectively, her pot increase by £24K? If so, do we need to claim or is relief given at source? She's with Aviva.

Many thanks
Paul

[Taita]

Aviva should do the 20% automagically in my experience (I am with Aviva).

[Bobtherallyfan]

Surely would only make sense if you are already maxed out?

[Taita]

Worth considering age / ISA allowance etc too

[MrHappy]

I’m fairly certain it would be £25K.

[TwigtheWonderkid]

MrHappy said:

I’m fairly certain it would be £25K.

Indeed. In order to realise the 20% tax relief, you need to add 25%. To realise the 40% tax relief, you need to add 66.66%.

[Dr Jekyll]

anonymous said:

[redacted]

Not at least £25K?

[deckster]

anonymous said:

[redacted]

But you also have to take into account the potential growth of the additional 20%. If she's retiring next year, this probably isn't worth taking into account. If she's retiring in 30 years time it could be hugely significant.

[audi321]

She would need to be earning at least £25k to make a net contribution of £20k.

OP - I assume you are also a basic rate tax payer? If so, why not split it £10k and £10k? Always better to split things to maximise all allowances (for example when taking the benefits - you'll both have a nil rate band to use up). If you're a higher rate then it all wants to be in your name for obvious reasons.

However, without knowing your circumstances it's hard to advise, but if all you want is to answer your original question, Aviva will do it all for her, don't worry.

[deckster]

anonymous said:

[redacted]

It's pretty straightforward - just take tax out of the equation. If you want £25k to go into your pension, then you need to have earnt that £25k.

[GliderRider]

audi321 said:

She would need to be earning at least £25k to make a net contribution of £20k.

There may be unused allowance from previous years which can be 'mopped up'.

audi321 said:

OP - I assume you are also a basic rate tax payer? If so, why not split it £10k and £10k? Always better to split things to maximise all allowances (for example when taking the benefits - you'll both have a nil rate band to use up). If you're a higher rate then it all wants to be in your name for obvious reasons.

However, without knowing your circumstances it's hard to advise, but if all you want is to answer your original question, Aviva will do it all for her, don't worry.

If the OP is anticipating being liable for income tax when receiving his pension, and his wife not, then putting it all in her pension would make sense.

[5pen]

GliderRider said:

audi321 said:

She would need to be earning at least £25k to make a net contribution of £20k.

There may be unused allowance from previous years which can be 'mopped up'.

You can carry forward unused annual allowance, but you must still have sufficient earnings in the current year to cover the contribution.

[GliderRider]

5pen said:

You can carry forward unused annual allowance, but you must still have sufficient earnings in the current year to cover the contribution.

Thanks 5pen, I wasn't aware of that. I've also found that you must have already been in a pension scheme (other than the state one) for the years from which you wish to use the allowance.