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?

I am afraid I can't remember the details of the top tax band, but would that 8k also be subject to the high marginal tax rate (60%) as you lose your personal allowance? So 8 k pre tax would only be worth 3.2k post tax? If so it seems like a financial no brainer, but you need to make sure no benefits in kind or bonus etc tip you over the 100k.

Another risk - any chance he will exceed lifetime pensions allowance? Something to factor in .

You are very fortunate to have these problems!

@BABAHOTEL an isa is avoiding tax. So is a pension. Both are perfectly lawful ways of avoiding or “planning” for tax. Imo nothing immoral about it either.

@SamphiretheStickerist I don’t agree it is “convoluted” for a person to pay extra into their employers pension. It’s usually really simple. Bdw no such thing as joint pensions in the U.K.

@EatingGreens

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

I can see your point here. I can also see that it may be galling to a lot of people here that an obvious high earner is looking to engineer a situation where her family receives something their income suggests they should not.

But to be fair I think she is asking for advice on a perceived unfairness of building up her husband's pension whilst leaving hers unfunded. She is obviously paying for advice from a professional as there is no way a layperson is coming up with that kind of complex tax/income planning strategy on their own.

As regards to the ethics, well, don't hate the player, hate the game. I don't see any obligation to arrange ones finances is a manner that sees them maximise tax and minimise benefit entitlement.

There are lots of things that go on, from businesses 'employing' spouses then paying salaries and divs to maximise a second set of personal allowances, take in cash in hand work which minimises tax and maximises potential entitlement to benefits, right up to using mundane things such as ISAs, trusts, pensions, buying yourself a laptop/phone/truck and saying its for work etc. etc.

He/she without sin cast the first stone.

[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]
Not advice, but maybe a direct response of generic in this field. So I would say the reasons that MAY exist:

Annual allowance of £40k for pension contributions. However even if this is exceeded, carry forward from previous years may be available. Also whether contribution is within 100% of earnings for the year.

Lifetime Allowance. If DH is lucky enough to have pension benefits that exceed £1,073,100 it is worth factoring in, but even still, not completely dismissing. Benefits may still outweigh a Lifetime allowance charge.

Perceived Unfairness

Emergency cash/cash flow and can you essentially write off access to the money until DH reaches age 55.

Hopefully you've engaged a qualified financial adviser here rather than an accountant overstepping their brief. An adviser must factor these issues in before outlining their recommendation to you in writing where the benefits and downsides are explained in detail. Don't be afraid to go back to them if you have any questions for them.

[quote CayrolBaaaskin]@BABAHOTEL an isa is avoiding tax. So is a pension. Both are perfectly lawful ways of avoiding or “planning” for tax. Imo nothing immoral about it either.[/quote]
Of course it's tax avoidance, perfectly legal, perfectly legitimate and very sensible. But we all do it to avoid tax.

Tax avoidance is not illegal but tax evasion is.