Joint money in HIS pension fund

[ByMyName]

DH and I consider our money joint. We put almost everything in a joint account. I have my own business can can do some planning around income. DH is on a normal job and cannot do a lot of planning.

DH’s income means that we will lose 30 hours government childcare funding. One option is to put extra money in his pension fund. About £8k-ish extra/year. But it has to be in his pension fund and we cannot have a joint pension fund.

Is there any reason not to do it?

What are you both doing to make sure you have equal pension provisions?

No not really - it makes sense from a tax point of view and if you dont do it then you will just lose the money you have to pay out for the 30 hours from your own pockets.

Only real downside i guess is that once its in his pension its his money however in the event of divorce pensions would be looked at anyway and equalised in one way or another..

No! Do not. Share any money equally between your pension funds. Why on Earth would you not?

Doesn’t make much difference, if you split up you’ll be entitled to a share of it.

You need to consider both your pensions, as well as childcare, income, plus the usual bills, food etc as joint costs, paid for out of the joint pot.

So if he gets £8k into a pension, you need to put the same amount, plus whatever his standard contribution is, into a pension in your name. However, you'll still be disadvantaged due to lack of employer contribution so to be truely equal, you'd need to put in even more into your pension, as much as you can afford really.

This is especially something to bear in mind if the reason you're self employed is to give you flexibility to do all the house and child related stuff, sick days etc.

Other thing to consider is that, if he's a high earner, which seems to be the case due to this 'losing the 30 hours' factor, there's a lifetime pension contribution allowance, so check whether there's a risk of him exceeding this, because after that, there might not be any advantage of him putting money in his pension (not sure how it all works).

Unless he's financially controlling - there's only a couple of potential downsides / considerations.

Upsides

• If you stay together (and he is not financially controlling) then the money will be used to fund both your retirements. So it doesn't really matter what "pot" it is in.
• if you divorce, make sure you get a pension report and it will be equalised. So more money in the pot is better for you.
• you'll keep getting the 30 free hours. So money for both your retirements rather than on childcare is a good thing.

There are two quirks of pensions to consider.

1. as pp said, there is the Lifetime Allowance (and annual allowance) to consider. The tax implications of busting this are significant.

2. pensions income is taxed at your marginal rate. To minimise the tax you pay, you ideally want income coming from both you pensions.

For example, you both get £12,500 in your personal allowance. That means you can take £25k as a couple tax free per year (if you draw it equally. If that 25k came all from him, half of it would attract basic rate tax. Significant money to the govt. instead of in your pockets. (You can transfer a little through marriage allowance, but the point remains).

This second one is a good argument for building your pot to the same extent as his generally. But since you can't directly transfer the money to you and still get the 30 free hours, it's generally a wider point.

If he is financially controlling and you stay together, there is also a worry of financial abuse as the retirement cash is his to manage. As mentioned earlier - if you divorce then you should get your share.

Could it be split between yours and dh pension fund?

sorry just read it cant be split

This is the same as everyone has with employment based pensions. Unless you don't trust your dh, it seems mad not to. Surely his employer already pays into the fund?

The rules are the rules.

If budget allows, perhaps the full amount of 8k or the savings of the childcare costs can be added to your pension over the year?

If the budget doesn't allow, as @Dasher789 mentions, unless you have trust issues or doubt you'll make it to retirement together, who cares?

Talk to an accountant and an investment advisor. It might be possible for you to invest in gold or some other commodity.

If you want the 30 hours ( which is term time only) to be free (top ups likely needed as it is notoriously underfunded) you need to get DH's earnings to under £100,000 (unless Scotland, and minus allowed deductions -eg pension contributions). Does he need to be careful of his annual contribution limit (£40,000/year which includes employer)?
I would do it to get the childcare. It would be good if you set up your business to build up your pension as well (and remember to get your tax relief on pension contributions ).

Thank you for taking the time to comment. This is really helpful. Some points are:

1. The rules are that the extra £8k need to be in his pension pot. We are not allowed to split. If we did not put the money in pension, we lose the childcare completely and he has extra tax to pay. He will be under the £40k limit.

1. I agree that I need something as well. I think I’ve always been a bit more flexible / risky. I genuinely view his pension as our pension though. I could put an equal amount in my own pension to make it more equal or look at buying a rental or something to diversify.

Really appreciate all the advice!

By planning around income I assume you mean dodging tax - but you want the benefit of free childcare paid for by others taxes!

@Aishah231 if her husband earns £100k they're more than paying enough, more than the vast majority who get things free

@Aishah231 I don’t dodge taxes. I am a business owner and it’s perfectly legal for my to take more income in one year and less in another year. This is a very small advantage that I have for taking on business risks and for providing other people with a salary and national insurance contributions paid for by my business.

DH paid into a pension for me as he earned a lot. We are retired now and the money is shared.

I think the underlying question is 'Do you trust your husband not to stitch you up financially' otherwise why would you even post this?

Please just make sure you have equal pension provisions - come what may, you'll be sorted.

If you can afford to chuck an extra 8k into a pension you can afford the cost of childcare

My exH was putting money from the joint account into his pension (I had one from my previous employment). So when we split up we had to take our own pensions and his was not split. I was a bit annoyed as his had been made from money from the joint account.

@Mumofsend we can afford childcare but it makes more sense financially to put the £8k in a pension - tax savings plus we can access the money on retirement. I don’t want to lose the free childcare.

@everyonebutme I’m sorry to hear this! I always thought that pensions were split. Were your pensions of the same value?

If it's for childcare it's only for a couple of years isn't it? Do the 8k in dhs for now. When the dc doesn't qualify for childcare switch 8k to your pension for a couple of years. Thrn it's even stevens.