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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

Original poster

Joint money in HIS pension fund

57 replies

ByMyName · 31/01/2022 15:07

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?

OP posts:
LaPufalina · 01/02/2022 06:57

My BIL has this issue and they drop to 15 hours of childcare rather than 30, if that makes any difference?
I looked into overpaying more to my pension for child benefit reasons but with my bonus and BIK (company car and medical) it takes me close to the £40k a year limit, so bear any BIK in mind as well.

FindingMeno · 01/02/2022 07:02

The point is that the rules say you can afford to pay for childcare, I assume? ( having never been in a position myself where I earn too much for that sort of thing)

gogohm · 01/02/2022 07:11

Tax avoidance even though legal is hardly moral! You obviously don't need the 30 hours if you both earn over the threshold and need to plan to reduce your incomes albeit legally

BABAHOTEL · 01/02/2022 07:17

@Aishah231

By planning around income I assume you mean dodging tax - but you want the benefit of free childcare paid for by others taxes!
It's not tax evasion, it's tax planning.

You could argue investing in an ISA is avoiding tax? Which of course it isn't.

FindingMeno · 01/02/2022 07:31

I don't like this sort of 'tax planning'.

Original poster
ByMyName · 01/02/2022 07:34

@gogohm I don’t feel what I’m doing to be immoral in the slightest. DH and I are both in key working positions. We contribute to society plenty. Everyone else gets free childcare, and if there is a legal way for us to get it - why not?

OP posts:
Original poster
ByMyName · 01/02/2022 07:35

@HighlandCowbag you are 100% right, it’s only for a
Couple of years. I think it’s the best option to do it for 2 years for DH and 2 years for me.

OP posts:
PicaK · 01/02/2022 07:41

The danger is if you divorce.
It's all very well saying the money should be split but men go very funny about their pensions at that point.
To get a proper valuation of a pension costs about £3k and takes months and months.
Then you still have to negotiate and agree. Going to court will cost you c20k each.
And then £s in a pension aren't seen as equal to £s in a bank.
Ask people on the divorce board how many of them feel they got a fair split of the pension.
I'd be really wary. Plus he could drop dead so you'd only get a reduced amount.

nellly · 01/02/2022 08:27

@SamphiretheStickerist

No! Do not. Share any money equally between your pension funds. Why on Earth would you not?
Because thats exactly how it would have to be done to not lose the 30 free hours it would have to come off his wage before tax direct to his pension. Doesn't mean they can't make extr arrangements to even things out by also adding to OPs though
SamphiretheStickerist · 01/02/2022 08:31

OK! That makes more sense now. But it shouldn't be that convoluted! Bloody ridiculous!

BABAHOTEL · 01/02/2022 08:47

@PicaK

The danger is if you divorce. It's all very well saying the money should be split but men go very funny about their pensions at that point. To get a proper valuation of a pension costs about £3k and takes months and months. Then you still have to negotiate and agree. Going to court will cost you c20k each. And then £s in a pension aren't seen as equal to £s in a bank. Ask people on the divorce board how many of them feel they got a fair split of the pension. I'd be really wary. Plus he could drop dead so you'd only get a reduced amount.
You're very much confused with this. A DC pension is an instant valuation. A DB scheme produces a CETV which is valid for three months.

Not that many DB schemes in operation now, most likely the DH has a DC scheme, which is very easily valued and split.

BABAHOTEL · 01/02/2022 08:49

@PicaK

The danger is if you divorce. It's all very well saying the money should be split but men go very funny about their pensions at that point. To get a proper valuation of a pension costs about £3k and takes months and months. Then you still have to negotiate and agree. Going to court will cost you c20k each. And then £s in a pension aren't seen as equal to £s in a bank. Ask people on the divorce board how many of them feel they got a fair split of the pension. I'd be really wary. Plus he could drop dead so you'd only get a reduced amount.
You're also incorrect with the death benefits of a DC scheme. You don't get a reduced amount.

You would if it's a DB scheme, but presumably she'd also get death in service if he's still an active member,

Pootlepoodle · 01/02/2022 08:49

Well, it’s convoluted to deter people from “tax planning” as in the case of OP.

BABAHOTEL · 01/02/2022 08:53

[quote ByMyName]@HighlandCowbag you are 100% right, it’s only for a
Couple of years. I think it’s the best option to do it for 2 years for DH and 2 years for me.[/quote]
Perfect solution!

Everanewbie · 01/02/2022 09:32

OP. Who's idea was this? As a finance professional I find it unlikely that you would have come up with this strategy yourselves. If you have consulted a professional, ask them to spell out the pro's and cons clearly.

It sounds like your husband is a high earner, meaning that you'll get the double bubble of greater tax relief on the contribution (and higher starting point for compound growth to provide flexibly for BOTH of your retirements) and the reduction of his income below the free childcare threshold. As previous posters have pointed out, pensions would be considered in any divorce and death benefits are paid with an expression of wish in mind and are outside of the estate.

Assuming you have no pressing need for the money and have sufficient emergency funds etc. the only real issue is the fact that it would be 'in his name'. If that is more important to you than extremely beneficial tax treatment and the restoration of free child care, well, you'll be missing out.

user1471457751 · 01/02/2022 09:44

@SamphiretheStickerist the bit where she can't!! She mentioned that in her OP. They are trying to reduce his income so they can get help with childcare. A way to reduce income is to put into your own pension. You can't just give it away

EatingGreens · 01/02/2022 09:49

Not everyone gets free childcare.

It's up to you to arrange your tax schemes within the law but own your own actions op and don't assume about others.

Mumofsend · 01/02/2022 09:56

[quote ByMyName]@gogohm I don’t feel what I’m doing to be immoral in the slightest. DH and I are both in key working positions. We contribute to society plenty. Everyone else gets free childcare, and if there is a legal way for us to get it - why not?[/quote]
Yet its low earners who are scrounging cheats Hmm you earn over the threshold, you can easily afford the childcare. It's immoral to evade it.

EatingGreens · 01/02/2022 09:59

Tbh the op and Dp can afford to pay for their own advice too and not scrounge it from MN. 😉

perimenofertility · 01/02/2022 10:00

@Mumofsend

If you can afford to chuck an extra 8k into a pension you can afford the cost of childcare Confused
Hmm, yes this was my thought. You're creaming 8K off DH's earning into a pension to reduce his pay so that you can get the free childcare. I'm so pleased you can benefit from this free childcare that my tax goes towards.
OnaBegonia · 01/02/2022 10:08

Everyone else gets free childcare
And that makes it ok?
You're attempting to make his income lower so you can claim childcare that you could afford with he £8k you're trying to hide.
That's immoral to me.
Yet here on MN if someone claims benefits for an extra day their scum.🤷🏼‍♀️

SickAndTiredAgain · 01/02/2022 10:23

Everyone else gets free childcare

Well, no they don’t.

But I put more money into my work pension than DH does because it makes more financial sense - eg my company matches contributions to a lot higher level than his so we don’t want to miss out on that. So my pension is bigger than his with what is effectively joint money but it works out best overall.

FindingMeno · 01/02/2022 11:40

This is a perfect example of how the rich stay rich.

Original poster
ByMyName · 01/02/2022 11:53

@Everanewbie we got professional advice. However, they said there was no reason not to do it!! This is why I wanted to check if I was missing something.

OP posts:
BABAHOTEL · 01/02/2022 12:06

[quote ByMyName]@Everanewbie we got professional advice. However, they said there was no reason not to do it!! This is why I wanted to check if I was missing something.[/quote]
Honestly, don't listen to financial advice off MN, as you will see people are not clued up and give out misinformation.

My particular favourite is from @mathanxiety, who is American, so presumably has little knowledge of the UK taxation system, but suggests you invest in gold! I mean just what sort of batshit advice is that!