Pension for my wife

magma

I am 30 and have been working for 6 years. The company I work for have a decent pension scheme. I have a defined benefit pension (still above water, apparently!!) and I also contribute to an AVC. My wife on the otherhand, does not work (or does not earn a wage/salary I should say ). When our first child was born, we made the decision that one of us would stay at home. She will go back to work at some point, but as it stands, she will be entitled to no more than the non-contributary state pension. I would like to start a pension fund for her. We are young enough that if I start making small contributions to it now, it will be worth something on retirement. And when she does start working again, she could pay into it from her own salary.

Does anyone know what are the options for pensions for "housewives" or contributing to/setting up someone elses pension fund?

Pablo Sanchez

Hi Magma, to get the tax relief on contributions it must come from a earned income, and as such as your wife does not pay any tax, it would not make sense for you to contribute in her name.

It may be simpler for you to up your AVC's by the amount you would have contributed on her behalf. Then when she returns to work she can set one up in her own name.

You mentioned that your in your 30's, this means you can contribute up to 20% of your income into a pension and still receive tax relief.

The J Stands for Jay

Your wife is allowed to pay Into a pension, but as she has no income, she will not get any tax relief. Then when it's time to take the benefits, the balance after any tax-free cash will be taxable. In effect, you will be taking yur aftrer tax income and volunteering to pay more tax on it.

If you would.like your wife to have money invested that isn't tied to your pension, a life assurance company savings policy may be worth looking at. Only the growth in the fund would be subject to tax.

magma

Thank you both for your advice!

okiss

From what you have told us your wife may be entitled to avail of the homemakers scheme via the department of social welfare.

People who leave the workforce for periods spent caring can have gaps in their insurance records which can affect their entitlement to a State Pension (Contributory) at age 66. The Homemaker's scheme, introduced in April 1994, allows for periods spent providing full-time care to children up to 12 years of age or an incapacitated person to be taken into account for pension purposes.It does not provide social welfare payments while homemaking.

If you go into welfare.ie and put in
Homemaker's Scheme -SW1 into the search area it will give you more information on this.

Another thing that you may consider is to invest in a low cost unit funds. These funds are used to buy shares, commerical property, ect some what similar to a pension fund. You will pay tax once you sell the units in the funds. If you look up rabodirect.ie they offer these and the cost and managment fees are low so you invest more money each time you make a payment to them.

Another option for you would be to invest a min of €50 each month into goverment saving certs. You have these for 5 years.
The interest earned is tax free.
If you invest in Dec 2013 they mature in Dec 2018, invest in Jan 2014 mature in Jan 2019 ect. When they mature each month reinvest the money and in 10-15 year time you could have a nice sum of money saved.

I would not be keen on a life insurance companies savings policy due to the set up and on going costs. Some people have saved in these funds for 15 years plus to get less money than what they put in.

magma

Some nice info there okiss, thank you!