Lower rate taxpayer - PRSA or straight ETF purchase

[Decision Tree]

Hi All

Me - PAYE, salary 100K approx, I have a PRSA type pension and I am contributing the max allowed for tax relief.

Spouse - returned to work last year part time, salary 23K, currently not contributing to a pension.

We're jointly assessed for tax. We also have a jointly owned rental property, and split the rent recieved, about 7K each, on our form 11. We have some spare cash we want to invest, and trying to figure out the most efficient way.

Would it make any sense for my spouse who is taxed at 20% to make a lump sum to a PRSA against last years income, and do the same thing annually going forward.
Based on her age (56) I believe she would be eligible for tax relief on 35% of 23K salary = 8K and 20% relief on that = 2K. Or is this a pointless zero sum game as she would be taxed on drawdown.

We already have investment accounts with a couple of online brokers, so our alternative is to just buy some global UCITS EFT and/or UK ITs as we have done previously.

 

[RedOnion]

You can get 40% tax relief on her contributions if you join your finances.
Switch part of her tax band to you, so you earn more at 20%. She'll only get 20% relief, but she'll have headroom to earn rental income at 20% instead of 40%.

It works out at same net effect as getting 40% relief.

 

[Dave Vanian]

Agree 100% with @RedOnion and remember that 25% of her fund at retirement will be a tax-free lump sum, so she'll only be paying 20% tax on 75% of the fund, an effective 15% Income Tax rate on withdrawals. And no tax on investment gains in the meantime.

 

[Decision Tree]

Thank you for your replies folks, it does now seem like a no brainer, we will proceed with the PRSA.

With regards to the actual PRSA, looking for a global equities fund and best guess making around an 8K single premium annually. Zurich PRSAs appear to be easily accessible at 100% allocation and a 0.75% AMC, so we'll probably go with that option unless anyone here has other suggestions.

 

[Opal**]

Thank you for your replies folks, it does now seem like a no brainer, we will proceed with the PRSA.

With regards to the actual PRSA, looking for a global equities fund and best guess making around an 8K single premium annually. Zurich PRSAs appear to be easily accessible at 100% allocation and a 0.75% AMC, so we'll probably go with that option unless anyone here has other suggestions.

Is this available directly from Zurich? Website has 1% AMC.