does anyone know anything about pensions?

(21 Posts)
LaurieFairyCake Tue 03-May-16 20:11:51

I haven't had one for the last 15 years (been at home/ worked part time). Dh has a really good one that over a thousand a month goes into (public sector).

We are downsizing our house and will have a lump sum to attempt to equalise it a bit for me.

Obviously we're hoping not to split up hmmgrin but I think I'm in a precarious place financially if we did

Can I 'buy' a pension with a lump sum since I haven't had one for 15 years?

If I can't I could buy a cheap property (but I don't want to do landlording - maybe a capital investment?)

Anyone know anything or have any ideas ?

Will have about 80-100k when/if we downsize.

OneEpisode Tue 03-May-16 20:16:09

The new Lifetime ISAs might be a possibility for you if you are under 40?

LaurieFairyCake Tue 03-May-16 20:29:08

Not under 40 unfortunately

lavendersun Tue 03-May-16 20:33:31

Dear Laurie, sorry no pensions advice, but, .... can you have a look at the candle thread for me - my candle is so strong I can taste it. It isn't lit and my sitting room is 30ft by 15ft, where did I go wrong!

OneEpisode Tue 03-May-16 21:51:17

Get the to a pensions provider after you've solved the candle problem. The amount you can put into a pension each year is between £3600 and your total salary, with a max. You can use some of the allowance from past years, but only three years worth. Or if you are married you could contribute to dh's pension (buy extra years etc. if that'd allowed). Then divorce him and split the pension confused

LaurieFairyCake Tue 03-May-16 22:00:22

Get thee to a pensions advisor after you've solved the candle problem

gringringrin - best line ever

We can't add more to dhs pension. I'm defo not divorcing him.

Interesting that I can only buy 3 years worth but only up to what I've earned - that's terrible as I've basically earned very little

Do they really discourage people from equalising in marriage if you've been looking after children? Bloody hell. I will probably only be able to put in about 10k if I'm limited.

The candle problem - up to 10% of essential oils only - most 'good' candles are about 6% . You need a measuring jug for being accurate. 10% is really super strong - which I like.

OneEpisode Tue 03-May-16 22:08:07

This thread has gone a bit random! If you don't want to divorce him you could just suggest savings and investments go in your name....

LaurieFairyCake Tue 03-May-16 22:13:56

He's totally happy with that. But I don't know anything about savings or investments.

We both thought we could just tip the money into a pension with my name on it so that it went some way to equalising what we own

LaurieFairyCake Tue 03-May-16 22:15:39

What else could I buy?

I had a friend that owned a freehold of a shop that generated an income (a massive income as it was in London) - the shop was leased but he owned the freehold

lavendersun Tue 03-May-16 22:16:56

Thanks for the candle advice Laurie.

I think it is normal for some of the pension to be allocated to a non working spouse isn't it in recognition for their efforts on the home front in a divorce? Perhaps not and I am going mad.

Anyway, hopefully you won't have to consider that Laurie!

I would see a financial advisor about the most tax efficient way of saving money and maybe a pensions advisor too.

Diddlydokey Tue 03-May-16 22:17:41

There is an annual allowance of £40k and this can be carried forward for the previous 3 tax years if you are a member of a pension scheme but s.t. earnings.

www.hl.co.uk/pensions/sipp/how-much-can-i-invest

OneEpisode Tue 03-May-16 22:57:16

If you only had a "mere" £80k to £100k a single property might not be ideal.
A fund manager would invest for you, so you could be "in candles" and "long on the FTSE" with a portfolio of shares,
But perhaps an adviser could say that as a couple you could take a little more risk, such as the property investment in your name.
The pensions allowance is I think the lower of £40k and your actual earnings... So probably not high enough. You probably won't get it all in pensions in your name.,,

Sunseed Wed 04-May-16 08:05:30

To clear some confusion: anyone can contribute up to £3,600 gross per tax year to a pension and get basic rate tax relief on it (so actual cost to you is £2,880).

If your net relevant UK earnings are higher than this then you can put in up to 100% of earnings and get tax relief. But if your total pension input is more than £40,000 in the year (includes employer contributions) then you are subject to an Annual Allowance Charge. This is when you can use carry forward if you have unused Annual Allowance from the past 3 years to reduce a potential AA charge.

So to answer the OP, yes, you can make lump sum pension contributions using that £80-100k, you just won't get the benefit of tax relief on the whole lot going in.

LaurieFairyCake Wed 04-May-16 08:11:19

Sunseed

Are you saying I can make 80k as a lump sum pension contribution even if I haven't earned 80k in that year ( or the previous 3)?

And all I lose is the extra tax relief?

Sunseed Wed 04-May-16 09:50:51

Yes, I am. The other eligibility criteria are that you have been a member of a registered pension scheme and resident in the UK at some point in the last 5 years. You mention a scheme from 15 years ago, and I presume that you are in the UK?

You can put as much as you want in; you will only get the tax relief up to the first £3,600 as described if no other earnings. You will need to use Carry Forward to avoid an Annual Allowance Charge. If you have 3 years unused plus this year that means you could put in up to £160,000 gross contribution with no charge.

Just be certain that you are able to lock away the money as you cannot withdraw it until age 55. I would always advise that you have adequate easily accessible cash as an emergency fund (possibly using ISA allowance) before using a pension tax wrapper.

GeorgeTheThird Wed 04-May-16 09:55:05

But if op won't get tax relief on those pension contributions, why not just invest in non-pension investment funds? What's the benefit of the pension wrapper without the tax benefit on payments in?

Diddlydokey Wed 04-May-16 10:03:32

The benefits are tax free growth and good death benefits.

AppleAndBlackberry Wed 04-May-16 10:08:26

How long do you have until retirement? Can you feed in £3600 a year to get the maximum tax relief and invest the rest in the meantime?

Sunseed Wed 04-May-16 10:09:52

Exactly - tax free growth, able to take out up to 25% tax free cash after age 55 and the death benefits include no liability to Inheritance Tax. It is of benefit to self-employed people who can make an employer contribution and save themselves some Corporation Tax.

GeorgeTheThird Wed 04-May-16 10:16:54

You're likely to get tax free growth on non pension funds though, at that scale?

howabout Wed 04-May-16 10:32:17

We would be in a similar position to you but thought about this when I became a SAHM 15 years ago. Our approach is that I use my £3,600 pensions allowance every year. We then use stocks and shares ISAs to top this up. I don't think there is an advantage to paying into a pension scheme without the upfront tax relief as the pension would potentially be taxable when it is drawn - not the case for an ISA. My private pension and my ISA are invested in exactly the same way - it is only the wrapper which is different.

In your situation I would be setting up a pension to the annual allowance of £3,600 and an ISA alongside for the current approx £15k annual limit. This means you would be able to fully invest your £80-100k in 4 to 5 years. In the meantime bank interest of £1k is now tax free and it sounds like you also have spare PA to set against any excess interest earned.

The other things to consider are:

1 Do you need to make voluntary NI contributions to have a full 35 year record for state pension as you can no longer use your DH's record post the changes to state pension legislation.

2. What are the death benefits and survivor benefits in your DH's pension

3. Would your DH be considering taking a cash free lump sum from his pension post age 55 and what would you do with it / how would you split it

4 Are you likely to have to consider IHT because it is now easier to pass on assets in private pension schemes tax free. ( ISA protection wrappers can now also be transferred between spouses on death)

5 Have you kept track of pension rights you have built up from previous employment

I feel you may know far more about candle making than me grin

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