No Pension - Where to start

My wife is 46 years old. She has no pension. She is renting some farmland recently receiving approx 14K per annum. She would like to put approx 10K of this money each year into a pension for the future. Just wondering, is this the best course of action for her? Can she put lump sums of money like this into a pension? Where would she start to organise this? Thanks for your advice. Im not really great on pensions and not sure where she should start.

Does she have employment income?

If she does not have employment income, she will not get tax relief on the contributions. Rental income does not count.

If you have taxable income, preferably at 40%, then it would make more sense for her to give you the money and for you to make the contributions.

Brendan

Hi Brendan. Thanks for reply.
No she does not have any other income. Shes stay at home mother.
Is their no benefit to her starting her own pension with this money other than transferring to me. I already put 20 percent of my salary into pension already and may do more in the future.
Maybe then she would be better either investing this money each year or saving it deposit accounts (post office savings bond). Would that make sense?

PDCAT1 said:

Is their no benefit to her starting her own pension with this money other than transferring to me.

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One gets tax relief on pension contributions on the way in but one pays tax on the pension payment in retirement.
So there is a very good chance that she would end up being taxed on her pension payments although she got no tax relief on the way in, so it makes no sense.

Particularly if you can get tax relief on the pension contributions.
I don't see any disadvantage in giving you the money. You will get tax relief so your joint income will be higher. If you divorce, you can do a pension adjustment as part of the agreement.

Other than that, she should just save for retirement outside a pension scheme.

It's probably a good idea to do a full Money Makeover


Brendan

Brendan Burgess said:

So there is a very good chance that she would end up being taxed on her pension payments although she got no tax relief on the way in, so it makes no sense.

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Apart from CGT-free growth!

We'd really need a wider picture of the family's circumstances to give full advice but there are circumstances where pension contributions make sense absent tax relief on the way in.

@PDCAT1 - has your wife 10 years paid PRSI contributions? Do you have kids under 12? You know she pays Class S PRSI at 4% on the rental income already? (These are all relevant to her getting a state contributory pension at retirement age)

NoRegretsCoyote said:

Apart from CGT-free growth!

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1) Her husband also gets CGT-free growth in his pension fund and also gets tax relief on the contributions.

But even if she were single, it would take a lot of assumptions to justify it - the main one being that she would not be paying any tax on her income in retirement. But that is irrelevant as her husband can get the tax relief.

Brendan

Thanks very much guys for all the info. My wife recently stopped working and has Prsi contributions for 25 years. We have two gets, twins aged 10.
We have no mortgage, house valued at 300k, wife has land valued at 570k. Also have 247k in Post office 10 year bond finishing next year. Have 150k in shares in three former companies i worked for. About 50k between us in bank/credit union account. No loans for anything. My wife has no pension for future except state pension + land she rents for 14k per annum. I have three smallish pensions from former company schemes. 8k, 3k & my most recent company (not sure what that will give me) plus state pension. My main concern was the best way for my wife to put her 14k per annum so shes has some more income of her own when retired. Think might increase my own pension contributions to 30-35 percent and she could save her 14k into post office savings bond.(shes inclined to spend the money if sitting in a bank/credit union account . Thanks again for the help, ive never really got to grips with understanding pensions.

PDCAT1 said:

My wife has no pension for future except state pension + land she rents for 14k per annum.

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That will be €27k a year in today’s terms, which is pretty decent.

I really think your focus should be on maximising your own tax-relieved pension contributions.

Thanks Sarenco.
Think that's what ill do.

As I said earlier...

It's probably a good idea to do a full Money Makeover