Pension for stay at home spouse

[BizzyMissy]

I have a young primary school aged child and my husband and I have decided for the next few years that I will be the primary earner and he will do most of the out of school childcare and small amounts of freelance work (earning less than £10k). He is registered for child benefit, even though we don’t collect payments, to protect his NI credit for state pension until DC turns 12. I earn a decent salary and would like to put some money into a private pension for him for the next few years. Since my FT earnings are much higher than his, it’s likely that I’ll continue as primary earner for several years until DC is a lot more independent.

My questions are 1). Is there any benefit to actually paying into a pension given he won’t get any tax relief and is a stocks and shares ISA better (assuming he pays tax in the future)? 2). If a pension is the right way to go, which providers would be good for this situation?

Not sure if relevant but he is 38 without any significant pension pot. I have quite a large pot plus a separate reasonably large DB pension from previous employment.

Many thanks.

Why don’t you claim child benefit?
It’s there to help.

@GoingOutOutNEVER I assume the OP earns more than £60k

A stocks & shares ISA is more flexible, unless you want to tie your savings up to stop you from accessing them. Otherwise there's no point getting a personal pension that isn't receiving employer contributions.

Private pension gets 25% tax added. For every £100 I put in my vanguard pension they add (after claiming) £25
You cant put more in the private pension than you earn in the year (i think you can go back 3 years) & the most you can put in is £40k a year

I love that you are doing this & it's the sort of life admin that gets forgotten for the stay at home parent

I have a Lifetime ISA, as the SAHP I like the flexibility that I could access the funds in an emergency situation (albeit at a 25% penalty rate, which would cancel out the 20% government contribution plus a little bit) Obviously I don't intend to ever do this BUT I don't want it all locked away forever a la pensions.

We pay in £100 pcm at the moment, I am hoping as I am only 33 we can increase this in future. We also put the occasional lump sum in eg when DH gets a bonus. The government add on £20 for every £100 invested. You have to be under 40 to open one but you can continue paying in until aged 55.

He would get tax relief. Even without any earned income if he could get tax relief, could pay in £2880 which would be grossed up to £3600.
If he has income of £10k, then can put up to £10k gross to pension.

He'll still benefit from the 20% top up even if he's not earning enough to pay tax. The max contributions per year (including gov top ups) is capped at £3,600 or his level of earnings. You would want to look at a SIPP. If he has an existing pension elsewhere, like an old employee pension that is no longer getting contributions, he may want to transfer it to his new SIPP as well.

As low cost a pension as possible would be good. I would look at SIPP providers like Vanguard who have platform fees from 0.15% plus fund fee.

It is different if there is already a SIPP in existence with £100k plus in it - at that point fixed fee platforms can be lower cost, such as iWeb, Interactive Investor. Check the dealing fees and deal infrequently.

20% sorry
In any case I think it is worth doing.

Thanks. Really appreciate this information. I think we’ll pay all of his earnings into a SIPP and look at a lifetime ISA as well.

How does the 20% top up get added? Is it automatic? Thanks

Yep mine is added automatically each month. Think I'm with Nutmeg.

The SIPP provider claims it. Known as a Relief At Source scheme. Usually gets added 6-8 weeks after.

If your child is at school is there any reason he can’t just earn his own money?

Thanks for confirming that it’s automatic.

@Bluntness100

If your child is at school is there any reason he can’t just earn his own money?

We have enough income for our family. DC is 5 and we don’t want her to be in wraparound care from 8 until 6. We don’t have any family nearby to help. Just what works for our family.

Don't forget, you can have a pension for your DC as well, and pay in £2880 per year, which the government tops up to £3600. Worth doing if you can afford to do so

I pay £2880 in a SIPP each year which get topped up to £3600 then anything extra gets put into a LISA which also gets topped up. You can put in up to £4000 a year which gets topped up another £1000. Get the LISA open quickly even if you just put a tenner in as you can’t open one once you turn 40 but can contribute till 50.

@sonypony

I pay £2880 in a SIPP each year which get topped up to £3600 then anything extra gets put into a LISA which also gets topped up. You can put in up to £4000 a year which gets topped up another £1000. Get the LISA open quickly even if you just put a tenner in as you can’t open one once you turn 40 but can contribute till 50.

Discussed this with DH and it’s what we’re going to do. Had no idea government topped up. Too good to miss. T

@Residentnumber1

Don't forget, you can have a pension for your DC as well, and pay in £2880 per year, which the government tops up to £3600. Worth doing if you can afford to do so

Interesting. Had been thinking of a junior ISA for DC to start building up some funds for house deposit or similar. Seems so far away to be thinking of pension for her but guess even a small amount paid in now us going to be worth a lot in 60 years!

DH and I are similar, but we’ve agreed to save more into my pension (to get 40% tax relief) than to put more into his (earns similar to your DH).

With the ability to draw down from my pension (rather than buy an annuity), it makes no sense to save in his name and miss out on tax relief.