Should extra pension contributions go into my husband's pension for tax reasons?

[TeaTowellery]

I work full time in lower than average salary job so pay tax at 20%.

My husband works full time, his salary is more and he's in the 40% bracket.

We've both always paid into pensions and
I've recently started thinking about paying in additional voluntary contributions as I'm worried my pension is low.

I am 10 years older.

It seems logical that i/we should pay the voluntary contributions into my husbands pension for tax purposes, but I'm just sense checking my legal position.

If we remain married then he'll still be working when i retire and can support me, then he retires in our jointly saved higher pension.

If we split, the pension is a marital asset? So I'm ok? Or is that naive.

It is important if your husband's pension is DC (which is usually inheritable) or DB (which may not be). I think there can also be issues for divorce as pensions may be differently valued relative to eg savings or house equity because they are less available.

Pension income is taxable so you may want to make use of your income tax-free allowances when you retire and/or be careful that your husband won't be a higher rate tax payer in retirement. I think I would want some in my name although we did make a similar decision to pay more into my husband's pension.

You need to very carefully check the rules on both schemes as pp say.

I have direct family experience of a spouse not being eligible to receive any of the other's pension after death.

You may see it as joint savings, but the respective pension companies do not and will have specific rules on what can be paid to whom and in what circumstances.

Thanks so much. Death isn't something I'd factored in!

I was in a DB scheme. I paid AVCs. They did not go into the DB scheme. They went to Standard Life. This would be heritable.

Paying most contributions into your husband's pension could also be a problem with respect to when you can access it. Your husband's earliest access age will be at least ten years later than yours. So if redundancy, illness or whatever means that one or both of you has to stop work earlier than planned, you may find that most of your joint money can't be accessed until years later.

Or even if the two of you are doing well financially and could be in a position to choose early retirement, say when he's 54 and you're 64, then he'd be too young to access his pension and you'd wish there were more money in yours. Of course, there are other ways to plan for this scenario, such as keeping some money outside of pensions entirely, say in ISAs.

On the face of it, 40% v 20% wins but I think with your age difference you should still be adding to yours given the accessibility gap. I am also increasingly wary that the thresholds for higher rate haven’t been lifted for so long that you do now need to consider likely pot value and whether your husband could be tipping into paying 40% in drawdown. There is no point leaving a pension now to anyone bar a spouse (unless you die under 75) as the inheritance plus income tax on it is so punitive If he already has a big pension, it may not be that useful, if his pot is small, you’d need to weigh up the benefits of the extra tax relief versus longer access time.

To be more cynical...

Divorce

It's not a given that pension would be split 50/50 one of you may end up with a larger percentage (albeit probably you if you're the lower earner)

Ownership

If the money is in your DH's name, it is his money. He might turn into a dickhead in older age and blow it/prevent you having access to it.

You need to check what you would get from his pension if he dies before you, it may be less than you think and he could also nominate someone else to receive it.

You would not be able to access his pension until much later in life.

If he became ill enough to need residential care all his pension might go on that, leaving you with little income of your own.

Pay your AVCs to a pension for yourself.

It is a problem. I had a relative who assumed that she and her husband were in good shape financially, but it turned out that he had secretly drawn his entire pension as soon as he was allowed, and had gambled the whole lot away, leaving them with nothing.

Put the extra into yours as you have 10 years less to save than him as you're 10 years older. Plus you'll want to use your tax free allowance when you take the pension. If it's all your husband's he might have to pay 40% income tax on it, when he takes it. Plus you might not be entitled to have any, if the worst happens and he dies.

Pay it into yours. You earned it, keep it.
As lovely and happy as your marriage is now you never know what the future holds.
Even if you stay that way people’s attitudes to money and risk can change as they get older, don’t give away control over your contributions. I know of 2 older couples who were more ‘traditional’ with their finances and their husbands keep a vice like grip on every single penny. It’s not necessary in either case but it sure does suck the joy out going for a coffee with friends.