Should high earner pay into SAH spouse’s pension?

[Mazuslongtoenail]

I often read comments to SAHPs that their DH should be paying into a pension for them.

But, if they are a high earner, they would get 40% tax relief on their own pension contributions. So £1000 earns £1400 in high earner’s pension or £1200 in SAHPs. (Unless I’ve misunderstood).

I understand the point about financial protection in the case of a split, but if married the pension would be considered in the 50/50 divorce settlement wouldn’t it?

I totally agree about ensuring full NI contributions are made because that impacts state pension later on.

You don't need to make NI contributions when you are a SAHM. You need to get the CB form,. and complete it. There is a Q which says something like "I am entitled to CB, but I do not want to receive the funds". Underneath this there is another statement which says something like, "I wish to receive the NI credit to my state pension" - TICK BOX. Everyone is entitled to CB, and so entitled to NI credits (contributing to state pension etc). You are just not entitled to keep it if you earn over a certain amount. You could claim it if you earned a million quid, but you would have to pay it back.

I know this because I filled out the form, and ticked the box for NI credits, then I received 5 full years NI credits and so 5 full years knocked off my state pension contributions, despite my DH being a high earner.

On top of this he should look into paying into a private pension for you. My DH put £250 a month into a Virgin pension I had from my old job every month.

Forgot to add, you can only do this until your youngest is 12. Then you should pay NI.

Also, check to see what years you have missed. When I moved back to the UK I bought 7 years at quite a low rate.

You need 35 years to get a state pension.

So many of my friends are misinformed about this. Some think you get a full state pension, just because you have a British passport. Others say, oh my DH's pension will do. You just don't know what is going to happen. By the time I retire it should be at least a grand, and I should have some private pension to add onto this.

I'm playing catchup with mine as I lived overseas for many years and then was a SAHM. I have 13 years till I retire, and 8 more years to pay into it.

To be clear - I’m not a STHP. I’m the higher earner and my DH is a standard rate tax payer, hence why I don’t really know about NI for SAHPs.

We put most of the family ‘pension money’ into my pension for additional tax relief which is why when I see so many ‘he should be paying into your pension’ replies I wonder if it’s actually good advice (for married couples where one is a higher rate tax payer.)

I am the sole earner and pay into my pension to get the full tax relief possible.

DH and I share my salary/pension and that will continue when I retire. Getting to be a higher rate tax payer at retirement isn't likely to happen.

DH is a SAHD and does not work. He is missing NI contributions which I guess I will have to make up so he gets his full state pension.

It is not guaranteed that if you separate that your partner will get 50 percent of the pension. It is seen as a starting point to negotiations.

it is also not guaranteed that your partner will get your pension if you die I.e if you have nominated your children as beneficiaries and not your partner.

you may say now that you would never screw your partner over like that but lots of people do.

paying into your partners pension provides them more security if something were to happen.

One thing to consider is what happens when you retire on your private/work pension, if your partner has no personal pension to speak of.

For example, DH has a final salary scheme, and I have a small personal pension pot from various old workplace pensions. (I was a SAHP for many years, when no pension contributions were made, and now work part time and so am making small contributions again).

DH wants to retire at around 57. Great for him, he can take his pension then and the annual amount isn't hugely affected by him starting to draw it early.

But he has just realised that I would have practically no income if I retired at the same time as him! Yes, of course his pension would be family money. But he would also like me to have my own independent income (and so would I tbf).

So we are now maxing out my annual contributions - better late than never.

You might also want to think about inheritance. Pensions can be left to your children outside of your estate and therefore free of inheritance tax. So for us, building up my pension means that if something were to happen to me, that money would not be taxed. Likewise, a large proportion of our assets is DH's pension pot, and so if anything happened to him, especially if it were just after he started drawing it, a huge amount would just be lost. So it's good to spread your assets between spouses.

Both these things are true but you would have to really not trust your partner to be prepared to sacrifice the 40% tax relief

I guess this sums up my point of the thread really. It’s a nice idea in practice but it’s a heck of an expensive gesture to make.

It’s not good advice and in real life, almost never happens. I was the higher earner in my relationship (woman) and would never have given up 40% tax relief and employer contributions to pay into my exes pension. It would have made no financial sense.

I have saved up some funds for dds pensions though but stopped as better tax relief in mine at the moment.

It's especially sensible if the higher earner has maxed out their own annual allowance.

It's true that pensions should be split on divorce but that isn't always what happens. Very often a woman who has not been working will be more concerned about what's going to happen to her now/ keeping the house and so may give up on any of the pension as part of the settlement.

Personally if I got a divorce I'd let my husband keep the house if I could have his pension (which is better than mine as he didn't have babies) , as I have my own income and am more concerned about the future than the now.

What about death?
As in the high earner dies before reaching pension age. What does the lower earning is rather getting?

Other potential issue: having all your eggs in the same bag. Seeing how many pension schemes have ‘lost money’ or how some pension schemes handle issues such as Liz Truss budget, it might be worth spreading risks.

Seeing that about 50% of marriages end up in divorce, is it really sensible to base our decisions only on ‘trust’?

It’s not an issue about trusting your partner. It’s an issue with putting a very practical and sensible hat on.
And making a judgement call in risk.

This should not be a hard stick to evaluate how much your partner trust you (esp if you are the high earner!!)

What would you suggest then?

If I die, DH gets the whole lot. Most people have “money purchase” pensions that operate like that.

DH has a lower annual allowance for tax relief into his pension due to his salary, it maxes out at £10k so it makes sense for us to put money into a personal pension for me. I do earn a small amount through my company so it's more than the limit for non-earners of £2880. I also put some into a LISA for retirement and max out my other ISA. All our income is pooled so we don't see it as DH paying into my pensions, it's me paying into my pension and ISAs from the household pot.

We both have quite a lot in other investments so we don't really stress about what goes into the pensions really. I've got NI sorted through child benefit and Carer's Allowance so I have no gaps in my record.

The important word here is ‘MOST’.

The OP was asking if it was ok. One if the answer is ‘Maybe but ONLY if you ensure that your dh/DO gets your pension if you die’.
Because as you said, not ALL of them operate like that….

If you have access to his wages, can you not start your own small pension?

You married a decent man. Not everyone is as lucky.

Yes, good point. I hadn’t clarified but was talking SIPP rather than annuity. You’re right, everything in one person’s annuity would be terrible.

My DH does. Started when we had the dc, and he still tops it up now.