Boring Stuff – paying into my wife’s NHS pension

My wife and I are trying to figure out what’s best to do with our pensions and investments. Which makes me want to throw myself under a bus.

We’re thinking of doing a swap. She has a final salary NHS pension. I have a normal Nest pension. We thought it would maximise our retirement income if I put my voluntary pension payments into the NHS pension (she’d increase her payments and I’d pay her a direct debit).

The swap would be that I open an investment ISA and she pays into that, which she can’t do herself because she’s American.

Does this make sense? Would it work? What could possibly go wrong?

Bump.

If you operated shared finances you wouldn’t have to ask this question and if you don’t trust each other/aren’t committed enough to do that then do you really want to be paying into her pension?

Worth considering what happens should one of you die before or after retirement especially with regards to any benefit from the pension scheme which could vary considerably if your wife should die as an active, deferred or pensioner. It’s the sort of thing you need a decent advisor for…..if they exist

If it’s a final salary it’s not going to help as her pension will be based on her salary? Unless you are talking about buying years (depends how long she has worked). There are multiple nhs pensions depending on when she started. You used to be able to get a free ifa session via some of the nhs unions.

I would get some advice.

Why can’t she open an ISA as an American?
My Gf is German and has an isa with Vanguard.

If you’re playing switcheroo with pension contributions – do you both pay the same marginal rate of tax?

if you can buy extra years on your wifes pension then do so. Even in the newer scheme its really good value

Scotroutes – Mrs TJ and I have had separate finances for 40+ years. some folk like it that way.

Worth considering a SIPP pension, rather than an ISA? Tax relief on the money getting paid in, whereas ISA you get the tax relief when you withdraw. Explained here:

https://www.vanguardinvestor.co.uk/articles/latest-thoughts/retirement/sipp-or-isa-how-do-you-decide

And since she’s a US citizen, might be relevent:

https://www.ssa.gov/pubs/EN-05-10199.pdf

Thekingisdead- it’s an investment ISA. As a US citizen she can’t open any kind of investment account in the UK other than a pension.

Zigzag- while it’s for long term investment, the investment stuff is for money that we could access if we really needed to.

Our concerns are as Rubber Buccaneer mentions – what if she dies within a couple of years of retiring? Will that cause me problems? I think if we need to speak to an IFA we will.

Final salary pensions are great for the individual whilst alive, most halve on death in respect to spouse/partner. In a generous scheme this means a lot of money disappearing. There used to be COMP schemes that ran alongside Final salary but they were just a normal pension pot.

Get proper advice.

Let’s take the emotion out of the question, you’re just asking us which investment(s) we think is the better return – I’d talk with someone who you can give the actual details to, rather than random folk off the ‘net.

And for folk with separate finances, what happens if the OH lose their job – do you give them charity? 😉

Yep, I think we’ll have to speak to a professional. In fairness, I think that’s the first time I’ve asked a question on STW that hasn’t had a complete resolution.

In regard to joint accounts, because my wife has to file everything that goes through all her bank accounts in the US for tax every year, combining our accounts would work to our detriment.

Sorry you are wrong about Americans’ not being able to open an isa. Some may refuse as they don’t want to mange the exchange of information with the US gov. My advice is shop around my wife, who is also an American citizen has several Isas and savings accounts. You just need to declare them on the US tax return and FBAR.

And for folk with separate finances, what happens if the OH lose their job – do you give them charity?

Mrs TJ lost her job a few years back and had a redundancy payment. She still insisted on paying her way but the redundancy payment was disappearing. I was of course perfectly happy to sub her but she made damn sure she got another job before she had to ask me for beer money!

Its about pride and independence.

It doesn’t matter how a couple arrange their finances – only that both parties are happy with the deal you have. We always earned similar amounts and ran 3 bank accounts, mine, hers and joint. We both paid half of living costs and what each of us had left was for the individual to do as they wanted. Money has never been a bone of contention

I am in a similar ish situation where Mrs FD has maximised her NHS Pension contributions. We have just had a conversation with and IFA, his advise was in order of priority – maximise pension as most tax efficient, and then look at ISA’s.

What I am trying to work out is if I buy extra pension, does my employer contribute to those additional contributions or only the base salary ?

Edit: Just spoken with NHS Pensions and the employer will not contribute to the additional sum.

I think for the sake of saving a few £’s I would therefore rather have the money in an ISA that at least is relatively accessible rather than the minimal tax savings from reducing gross salary before tax

I don’t really get why the swap. Why doesn’t she just pay into her NHS pension, and you pay into your ISA?

45 years together and separate bank accounts:-)
1st time you have have an account hacked you will be very glad to have separate accounts whilst it is sorted out.

I also know friends and family who have had probate problems with access to money – even though in theory a joint account should just pass to the spouse.

As TJ says years bought on final pension scheme are likely to provide an income that will outstrip income from most other investment options. Tho that will depend on the cost of extra years and American tax implications on the income gained. Even tho AliB and I have made roughly equal contributions over the years, probably latterly I paid in considerably more, the draw down recommendation on my pension pot would give half her income – and hers is guaranteed which is quite reassuring when markets plunge on your private pension/ISA.

You will lose pension withdrawal flexibility. So I can withdraw any amount I wish for any little luxuries. Also anything remaining in my pot will form part of our estate/inheritance. Admittedly an ISA should provide that same flexibility. Tho my opinion is that tax saved on pension contributions when you are earning esp if you enter higher bands, is likely to be greater than tax saved on a lower retirement income if that is when you access ISA savings.

A final salary scheme will likely half if your wife dies before you and will also stop when you both go. May not be an issue if you have no children. You might also wish to check what happens if your wife died and you wished to remarry. we have a friend who will lose her late husband’s NHS pension if she remarries.

All IMO. Good luck with your advisor.

Scotroutes – Mrs TJ and I have had separate finances for 40+ years. some folk like it that way.

Pension are effectively separate anyway – you can’t have a joint scheme (that I know of).

Most final salary schemes have a reduced payout for a surviving partner, normally around 50%. So if she dies early, you’ll continue to get something. Worth checking the actual details.

Also anything remaining in my pot will form part of our estate/inheritance. Admittedly an ISA should provide that same flexibility.

Pension potvfalls outside IHT rules in general. Yet another dodge for the rich to keep their wealth.

As is your home. At a rough guess you and most on here will have an income in at least the top 10% of the worlds income. So all pretty rich in world terms.

https://howrichami.givingwhatwecan.org

As is your home. At a rough guess you and most on here will have an income in at least the top 10% of the worlds income.

But our living costs are in UK terms, so not a very useful observation.

I wouldn’t worry about it, our generation will be working into retirement in some form or another.

The days of golden pensions are dwindling away.