Pension for the wife
Discussion
The advantage of a pension that you get tax relief on contributions.
If your wife doesn't pay tax then there is tax payable and therefore no relief.
She would be better investing in an ISA as all growth and withdrawals will be tax-free - as opposed to pensions where some of the growth (dividends) is taxed and when you take your pension it is taxed as income.
You can also withdraw from the ISA whenever you need to, no need to wait for retirement.
In addition, it's hard not to have to buy an annuity with your pension whereas you can do as you please with your ISA.
If your wife is under 40 then she qualifies for a lifetime ISA where the govt will contribute 25% - https://www.gov.uk/lifetime-isa
If your wife doesn't pay tax then there is tax payable and therefore no relief.
She would be better investing in an ISA as all growth and withdrawals will be tax-free - as opposed to pensions where some of the growth (dividends) is taxed and when you take your pension it is taxed as income.
You can also withdraw from the ISA whenever you need to, no need to wait for retirement.
In addition, it's hard not to have to buy an annuity with your pension whereas you can do as you please with your ISA.
If your wife is under 40 then she qualifies for a lifetime ISA where the govt will contribute 25% - https://www.gov.uk/lifetime-isa
nyt said:
The advantage of a pension that you get tax relief on contributions.
If your wife doesn't pay tax then there is tax payable and therefore no relief.
I don't think that's true. Even non tax payers still get the 20% uplift for a certain amount, up to £2880 I believe. So if she pays in £2880, she'll get 25% added on, so £3600. Basically, she gets 20% relief on the £3600 even though she never paid it! Free money. If your wife doesn't pay tax then there is tax payable and therefore no relief.
nyt said:
The advantage of a pension that you get tax relief on contributions.
If your wife doesn't pay tax then there is tax payable and therefore no relief.
She would be better investing in an ISA as all growth and withdrawals will be tax-free - as opposed to pensions where some of the growth (dividends) is taxed and when you take your pension it is taxed as income.
You can also withdraw from the ISA whenever you need to, no need to wait for retirement.
In addition, it's hard not to have to buy an annuity with your pension whereas you can do as you please with your ISA.
If your wife is under 40 then she qualifies for a lifetime ISA where the govt will contribute 25% - https://www.gov.uk/lifetime-isa
2010 called, it wants your comment back.If your wife doesn't pay tax then there is tax payable and therefore no relief.
She would be better investing in an ISA as all growth and withdrawals will be tax-free - as opposed to pensions where some of the growth (dividends) is taxed and when you take your pension it is taxed as income.
You can also withdraw from the ISA whenever you need to, no need to wait for retirement.
In addition, it's hard not to have to buy an annuity with your pension whereas you can do as you please with your ISA.
If your wife is under 40 then she qualifies for a lifetime ISA where the govt will contribute 25% - https://www.gov.uk/lifetime-isa
Edited by sociopath on Friday 23 April 09:21
You pay £2880. £3600 is added to the pension. I’m not a taxpayer and I did this earlier this month.
Two things nyt said are false. As mentioned, you can receive tax relief (up to a £3600 gross contribution) on pensions even if you don’t pay tax and you do not have to buy an annuity with the proceeds of a pension.
Two things nyt said are false. As mentioned, you can receive tax relief (up to a £3600 gross contribution) on pensions even if you don’t pay tax and you do not have to buy an annuity with the proceeds of a pension.
Edited by 5pen on Friday 23 April 09:46
jimPH said:
LISA - full
ISA - full
Pension - ?
I was told on the pension thread it's 3600 plus tax relief, not sure if that means she can contribute 2880 or 3600?
She can contribute 2880, the SIPP provider then claims and tops up to 3600.ISA - full
Pension - ?
I was told on the pension thread it's 3600 plus tax relief, not sure if that means she can contribute 2880 or 3600?
If she doesn't earn anything she should log on to the HMRC site and transfer £1260 (marriage allowance) to her husband.
If she's over 55 then she can take out up to £11310 tax free every year from her SIPP (12570 minus the transferred allowance amount).
sociopath said:
nyt said:
The advantage of a pension that you get tax relief on contributions.
If your wife doesn't pay tax then there is tax payable and therefore no relief.
She would be better investing in an ISA as all growth and withdrawals will be tax-free - as opposed to pensions where some of the growth (dividends) is taxed and when you take your pension it is taxed as income.
You can also withdraw from the ISA whenever you need to, no need to wait for retirement.
In addition, it's hard not to have to buy an annuity with your pension whereas you can do as you please with your ISA.
If your wife is under 40 then she qualifies for a lifetime ISA where the govt will contribute 25% - https://www.gov.uk/lifetime-isa
2010 called, it wants your comment back.If your wife doesn't pay tax then there is tax payable and therefore no relief.
She would be better investing in an ISA as all growth and withdrawals will be tax-free - as opposed to pensions where some of the growth (dividends) is taxed and when you take your pension it is taxed as income.
You can also withdraw from the ISA whenever you need to, no need to wait for retirement.
In addition, it's hard not to have to buy an annuity with your pension whereas you can do as you please with your ISA.
If your wife is under 40 then she qualifies for a lifetime ISA where the govt will contribute 25% - https://www.gov.uk/lifetime-isa
Edited by sociopath on Friday 23 April 09:21
Who the hell buys an annuity these days. Unless you're a giant tortoise. jimPH said:
Thanks guys, 2880 it is.
What is the tax rate above the contribution limit? Is it capital gains at 20%?
Is that only applicable in the tax year? Say for instance she put 20k in on April 4th, it resets after April 5th?
If you make a contribution over £2880 net/ £3600 gross you'll have to pay an annual allowance charge on the excess:What is the tax rate above the contribution limit? Is it capital gains at 20%?
Is that only applicable in the tax year? Say for instance she put 20k in on April 4th, it resets after April 5th?
https://www.pensionsadvisoryservice.org.uk/about-p...
https://www.gov.uk/tax-on-your-private-pension/ann...
https://www.gov.uk/government/publications/rates-a...
The charge is at her standard marginal rate of tax.
If you paid the excess into a standard GIA account then every year you can use the standard "bed & breakfast" type arrangements to crystallise any gains in the year free of any tax up to her CGT allowance of £12,300.
jimPH said:
Thanks guys, 2880 it is.
What is the tax rate above the contribution limit? Is it capital gains at 20%?
Is that only applicable in the tax year? Say for instance she put 20k in on April 4th, it resets after April 5th?
Why would you invest more than 2880 in a tax year if you don't get tax relief on it? Put the extra in an ISA instead. What is the tax rate above the contribution limit? Is it capital gains at 20%?
Is that only applicable in the tax year? Say for instance she put 20k in on April 4th, it resets after April 5th?
TwigtheWonderkid said:
sociopath said:
nyt said:
The advantage of a pension that you get tax relief on contributions.
If your wife doesn't pay tax then there is tax payable and therefore no relief.
She would be better investing in an ISA as all growth and withdrawals will be tax-free - as opposed to pensions where some of the growth (dividends) is taxed and when you take your pension it is taxed as income.
You can also withdraw from the ISA whenever you need to, no need to wait for retirement.
In addition, it's hard not to have to buy an annuity with your pension whereas you can do as you please with your ISA.
If your wife is under 40 then she qualifies for a lifetime ISA where the govt will contribute 25% - https://www.gov.uk/lifetime-isa
2010 called, it wants your comment back.If your wife doesn't pay tax then there is tax payable and therefore no relief.
She would be better investing in an ISA as all growth and withdrawals will be tax-free - as opposed to pensions where some of the growth (dividends) is taxed and when you take your pension it is taxed as income.
You can also withdraw from the ISA whenever you need to, no need to wait for retirement.
In addition, it's hard not to have to buy an annuity with your pension whereas you can do as you please with your ISA.
If your wife is under 40 then she qualifies for a lifetime ISA where the govt will contribute 25% - https://www.gov.uk/lifetime-isa
Who the hell buys an annuity these days. Unless you're a giant tortoise.jimPH , Is she ( or you ) paying voluntary NI contributions ( I gather this would be class3 which cost the cost something like £15.xx a week ) towards the sate pension ? Each year gets another 1/35 entitlement and at today's rate ( something like 800 a year ) means only requires living and drawing about 3. something years of pension from retirement age to be in the plus.
Of course none of this takes into account what gov will do with rates and what you might do with the 800 a year otherwise
Sure state pension is no bonanza ....but someone getting the full amount ( 178 a week equivalent as I gather ) is going to cover say council tax and bills every month maybe ? Better than a kick in the teeth and certainly a nice help as a second source of income
I have set this up for my ( non working ) wife and even going back and paying some catch up (limit to how far you can go back ) Many women live very long lives and will draw this pension for decades
Of course none of this takes into account what gov will do with rates and what you might do with the 800 a year otherwise
Sure state pension is no bonanza ....but someone getting the full amount ( 178 a week equivalent as I gather ) is going to cover say council tax and bills every month maybe ? Better than a kick in the teeth and certainly a nice help as a second source of income
I have set this up for my ( non working ) wife and even going back and paying some catch up (limit to how far you can go back ) Many women live very long lives and will draw this pension for decades
I don't know why people sneer at the state pension. My wife and I are both entitled to full rate (when we get to 67) and that's currently about £18500 between us, tax free. That's not to be sneezed at and a very handy addition to other income sources (private pensions, investments etc.)
TwigtheWonderkid said:
I don't know why people sneer at the state pension. My wife and I are both entitled to full rate (when we get to 67) and that's currently about £18500 between us, tax free. That's not to be sneezed at and a very handy addition to other income sources (private pensions, investments etc.)
Tax free ? My understanding is that it forms part of your taxable income - therefore maybe not subject to tax if you each earn under the threshold including private pensions, but it's not tax free as in protected / exempt from tax.Carbon Sasquatch said:
TwigtheWonderkid said:
I don't know why people sneer at the state pension. My wife and I are both entitled to full rate (when we get to 67) and that's currently about £18500 between us, tax free. That's not to be sneezed at and a very handy addition to other income sources (private pensions, investments etc.)
Tax free ? My understanding is that it forms part of your taxable income - therefore maybe not subject to tax if you each earn under the threshold including private pensions, but it's not tax free as in protected / exempt from tax.As for the Tax, this is my understanding too....just treated as part of annual income for tax purposes, of course individually one might imagine a couple drawing full state pension each plus their other sources , might feel like being it is below the individual tax free allowance, its like tax free.
PM3 said:
Carbon Sasquatch said:
TwigtheWonderkid said:
I don't know why people sneer at the state pension. My wife and I are both entitled to full rate (when we get to 67) and that's currently about £18500 between us, tax free. That's not to be sneezed at and a very handy addition to other income sources (private pensions, investments etc.)
Tax free ? My understanding is that it forms part of your taxable income - therefore maybe not subject to tax if you each earn under the threshold including private pensions, but it's not tax free as in protected / exempt from tax.As for the Tax, this is my understanding too....just treated as part of annual income for tax purposes, of course individually one might imagine a couple drawing full state pension each plus their other sources , might feel like being it is below the individual tax free allowance, its like tax free.
jimPH said:
Thanks guys, 2880 it is.
What is the tax rate above the contribution limit? Is it capital gains at 20%?
Is that only applicable in the tax year? Say for instance she put 20k in on April 4th, it resets after April 5th?
If you can afford to pay in for a private pension for your wife, are you not better off putting the equivalent amount into your own pension in AVC’s rather than setting up a new pension for her. What is the tax rate above the contribution limit? Is it capital gains at 20%?
Is that only applicable in the tax year? Say for instance she put 20k in on April 4th, it resets after April 5th?
That way you get 20 or 40 percent tax relief depending on what tax band you’re in. So ultimately you’re better off sharing your pension than setting up a new one with small contributions for your wife. I guess it depends on how old your wife is and what her career aspirations are (is she ever planning to work or always be a housewife?)
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