Pension query

[Annabel28]

I am due to be taking a short career break between April - Feb to focus on my family's needs. I am an NHS doctor and recently have been placed 1.5-2 hours away and juggling the commute with two young children has been horrendous. I have been told I can be moved to a closer post later in the year, so we are going to wait until our youngest is more settled in the school nursery and can do after school club etc. until I return. Luckily my husband earns enough to support us during this period and we also have savings to help.

When we made this plan, however, I said I would only take a break if we continued to pay in to my NHS pension as I resent how untouched his career/finances have been compared to mine since having children. He was in agreement, however yesterday pointed out that we will be using his income (taxed at 40%) to pay in to a pension that will not have an employer contribution (as I am not working) and we assume will at most get 20% tax relief (I'm not even sure if it would get tax relief if I'm not working, but I am currently a basic rate tax payer).

He is supportive and keen to help me invest in my future but is not convinced that setting up payments in to my NHS pension makes financial sense. If he were to set up a private pension in his name he would get 40% tax relief, but it would be in his name not mine. I was wondering how other SAHMs manage pensions? Does your partner/husband pay in to a single private pension on your behalf, and is there any way the tax relief can match the income tax they pay? I know I will only be a SAHM for a brief period but I am really reluctant to just stop pension payments altogether.

I’d start by saying looking at the benefits of your respective pensions. As your NHS pension may have more generous benefits than his pension. And factor that in alongside the tax relief.

So the tax relief may “buy” him more pension, but what you receive come pension time is also a factor.

Also give consideration to things like the stability of the pension, how many years you have to contribute before receiving it, that kind of thing.

You can get tax relief on pension when you are not working, it’s all annualised. You can even get tax relief on pension contributions in a year when you pay no tax at at all, up to a contribution of £2,880 (or £3,500 when tax is added).

Also bear in mind that you can back date contributions with respect to tax relief for up to three years I think, as long as in the future year you make a back dated payment in you have made your maximum eligible pension contribution in that year.

Those two features of course also depend on what your schemes allow. But it’s possible that you could make payments to your pension fund whilst you’re between posts and next year (or the year after etc) max out his contribution in that year and then make back dated payments to his fund.

DP took a huge temporary salary cut in 2020 to help with company cash flow made up the pension contribution the following year after the company basically gave everyone bonuses amounting to what they’d sacrificed to keep the company going (and then some as a thank you).

I’m chronically ill and not working so every year we make a contribution to a private pension for me and tax is reimbursed up to the limit previously mentioned. (This also applies to people who are in work but due to being part-time etc don’t pay £620 pa in tax).

It’s bear in mind that if you were to split, the value of pensions would be taken into account as assets in the division. So that leads you back to probably comparing the value (by outcome) of what you “buy” with your contribution.

I do understand though that there may also be concerns regarding different incomes in retirement if you stay together if you’re aren’t just pooling income equitably.

Anyway, hope this helps.

Thank you - I've actually now sought further advice and it seems I can continue to pay into my pension and get employer contributions for the first six months, so the tax issue is not so significant and it makes sense to maintain contributions. We do split our finances 50/50, but I think because I come from a home where my divorced mum was left in relative poverty in retirement thanks to all the childcare she did (compared to my dad who can afford to travel etc.) I feel sensitive around this area!