Pension - only paying into mine, not DH's as a long-term plan. Thoughts appreciated!

[UseItOrloseItt]

Would really appreciate thoughts on this.

We're late 30's, happily married (together 20 years), 3 dc. I'm full time employed earning circa £40k and have been with the same employer for 20 years. Dh earns £30k ish but is self-employed. All money is shared.

We've had a rocky financial past. Got into a bad situation about 10 years ago with debts (mainly due to mismanagement on our part and when we were earning less) but have pulled ourselves free and are now debt-free, secure home, all bills taken care of and some money to save each month.

Neither of us have ever contributed to a pension...not a penny. Dh has a few scattered pensions from various employers pre-self employment (employer contribution only) worth about £10k total.

In my sole pension with current employer is about £55k...again, employer contributions only, they contribute about 9.5% each month. Defined contribution pension.

We now have circa £200 a month (total, not each) to put aside solely for pensions. This may well increase in future but for now that's it.

My first thought was that we obviously need to prioritise a pension for dh as his is so much lower. Then I discovered my employer matches contributions up to 8% and have realised the difference this would make.

If we contribute £200pm into my pension, my employer will match it, doubling our efforts. If we put £200 into dh's pension, it's just £200. Obviously plus tax savings.

Now I'm thinking it would make far more sense for us to ignore dh's pension and just really focus on mine. It has far greater potential for growth with the additional matching contribution and to not make use of this seems like money down the drain.

Obvious pitfalls are dh being left vulnerable with no pension in his name...but we're married, if we split he'd be entitled to half and if I die, it would go to him anyway. And when it comes time to claim it, we only have my tax free allowance as it's all in my name so losing more to tax. But I think that would surely be made up for by the extra £x years of extra employer matches we wouldn't otherwise get.

What would your thoughts be? Am I missing something awfully obvious or is putting all our pension eggs in my basket the most sensible plan?

For various reasons changing careers for dh isn't practical so he'll remain self employed for the foseeable - so no realistic chance of him having any further employer contributions.

You said your employer contributes 9.5% but you don’t do any. It doesn’t make sense

@Bambooomoon my employer contributes 9.5% with no requirement for me to pay in. It's been that way for years and it's just those 9.5% contributions that have led to me having £55k in the pot so far (after 20 years employment).

In addition to that, they'll match any employee contributions up to 8%.

So if I pay in £0 a month, my employer contributes £315 (9.5%).
If I pay in £200 a month (less than an 8% contribution), my employer contributes £315 (9.5%) + £200 match - so a total contribution that month of £515 from my employer plus the £200 from me.

Yes, it's not clear what you mean - does your employer currently contribute 9.5%, and they'd contribute more to match your contribution up to an additonal 8%?

I do see your thinking here, but I still think your DH should start contributing to a pension. Is there any scope for him (/either of you) to earn more?

Cross-post.

Yes, usual advice would be to contribute whatever your employer will match up to if you can afford it. This would give you a reasonably high contribution though (although that's probably not a bad thing!).

Sorry for not being clear...yes, 9.5% is their base contribution. 8% match would be on top, only if I contribute.

There's a possibility of me earning more in future but it's dependent on internal promotion opportunities...I'm happy in my job, I have fantastic benefits and security that would be very hard to match elsewhere so I'm reluctant to change companies.

Dh's income unlikely to increase.

He needs to contribute to his own, my DH doesn’t have one, also SE but I do. I keep telling him he needs to sort it but it has yet to happen.

If this was the other way around and it was suggested you only pay into his, you’d be advised to set up your own.

None of you have contributed to a pension but you have £65k pension pit between you?

Pot not pit! Too confused to proof read!

Are you sure it passes to him if you die? Usually it’s a fraction that passes isn’t it, like 37%? If it leaves him vulnerable that’s unfair

I think you need to max out your pension to get the highest contribution from your employer. This will help you to catch up a bit.

But I also think your DH needs to start contributing to his pension, even if he needs to get an extra job one or evening a week or something, solely to make pension contributions.

Usually if you opt out of your payments the employer element is not paid. I don't understand how you have £65k from employer contributions? You either both contribute - employee and employer or you both do not contribute.

Yes...just from employer contributions.

Dh's £10k is scattered among about 5-6 employers though. Currently deciding whether to combine them or just wait a couple of years for pensions dashboards and go from there.

Usually if you opt out of your payments the employer element is not paid. I don't understand how you have £65k from employer contributions? You either both contribute - employee and employer or you both do not contribute

I've never opted out...the 9.5% my employer pays is just their core contribution and part of my employer contract.

I've just not opted IN to any additional contributions (so far).

There are schemes where no employee contribution is required. My employer pays 10% with no employer contribution and then matches up to an additional 3%. It's not particularly confusing.

I think financially your idea makes sense OP but it does leave your DH vulnerable. You might want to double check what would happen when you die and maybe supplement with life insurance?

Are you sure it passes to him if you die? Usually it’s a fraction that passes isn’t it, like 37%? If it leaves him vulnerable that’s unfair

Yes, 100% sure. I've checked and re-checked and read the policy front to back.

In addition, if I was to pop off, dh would get a spousal payment of circa £8k a year for life. That's part of my life assurance however and separate from my actual pension. And he'd get the main life insurance payout of circa £300k.

My employer has very good benefits all round which is the main reason I'm reluctant to leave and seek a higher salary elsewhere.

*Edited to add info about lump sum of LI

That is great, I want to work there!

You should absolutely max out your employer contribution, otherwise you’re giving up free money.

When my DH went self employed he stopped contributing to a pension and we only paid into mine, because as a higher rate taxpayer it was much better value. He’s back employed now so pays what he needs to get the employer contribution, but I still pay far more into mine

If we divorced, I’d happily give him half, if I die, it all goes to him.

It sounds OP has a DC (“defined contribution”) pension. Her DH will probably have a SIPP if self employed. If she dies then yes her pension can pass to DH in full if she puts that in her will.

OP and her DH are in the same tax bracket so no tax advantage to one or the other.

OP, your plan is sound. Put the £200 into your pension and get the matching. If there’s any scope to increase the amount you put in to max out the 8% then do that. It’s literally free money.

You should also check national insurance contributions as you have a chance to make up any missing years.

There will probably be a cap on the amount you can get your employer to match.
I would use your contributions up to the max possible, then switch tactic and bump up your DH’s with subsequent pay rises etc

We have done the same. I am currently a SAHM/carer (can't work). We don't have lots spare but my husband could contribute something to a private one for me but instead the same money is added to his one as the employer is topping it up. It makes no sense to contribute to mine and take away from his when his employer will make additional contributions. Obviously in an ideal world we'd do both.
We did check that the pension comes to me if he dies. We are married so if we divorced it would be taken into account.
I do have a small pension from previous employment but it won't be enough to live on. It does make me feel uncomfortable but financially we are better maxing out his employer pension contributions. If we get to the point where we have money to spare and have maxed out his employer pension contributions then we'll start on mine.

Sorry to have to ask this but what happens to your pension if you die - either before or after you get to claim it? Is there a benefit that will be paid to your partner or your dependents? Often that is discretionary and might be a lump sump rather than a pension so I'd be concerned about that. I guess you really need to look at the small print.

Try to contribute the full 8% that should be around £250 per month and will only cost you £200 of your bottom line pay - less if there is a salary sacrifice arrangement at work. If your DH was to retire at state pension age and he has a full state pension that will use all of his personal allowance anyway and as you are likely to be a basic rate tax payer - even with the private pension pot, the tax position is the same.

If your DH was to retire at state pension age and he has a full state pension that will use all of his personal allowance anyway and as you are likely to be a basic rate tax payer - even with the private pension pot, the tax position is the same

Oh my word...this is why I wanted to seek other opinions, I love MN for this.

Although I'd already considered the fact that DH will get full state pension (we're both on track for that) I'd completely overlooked the fact that this will use his PA anyway. So actually, one of the negatives I'd considered by only contributing to mine...the 'loss' of dh's PA when drawing down pensions...doesn't even exist! What a silly, simple thing to overlook.

Thank you 😊

Not exactly the same but my pension contribution is way higher than DH's mainly because my work offer a much better scheme. I also have a DB pension from an old job. DH contributes but not as much as me. So on retirement I estimate that DH's pension from his pots will be around £10k and mine around £40k. Thats excluding state pension. My DB pension wouldn't pass to him in full if I passed but my pot would. I could of course transfer my DB pension into a pot for more security there but general advice is to keep it as is.