How is an Annuity Taxed?
Question asked by Mr R Stein
My wife doesn’t have much of a pension and I want to make sure she is financially stable once she retires. Am I able to give my pension to her?
The short answer is no, you can’t transfer your pension into your wife’s name. The only way your wife can get a share of your pension pot is if you were to get divorced, in which case she could claim a percentage of your pension and move it to another fund, but understandably few people want to go to such lengths!
You can, however, pass on your pension to your wife inheritance tax-free when you die, provided you name her as your beneficiary.
Alternatively, you could make pension contributions on your wife’s behalf. This is particularly useful if you’re close to using your pension annual allowance, the maximum amount you can pay into your pension per year. If that’s the case, you could make contributions to your wife’s pension instead and she’ll get the tax relief.
If your wife is a non-taxpayer, you can still make pension contributions for her on her behalf up to a maximum of £2,880 per year (which will be grossed up by HMRC to £3,600). If she works, you can make contributions on her behalf of up to 100% of her salary each year.
If there’s enough time left until your wife’s retirement, you may be able to build up a pension pot for her in her own right. To calculate how much her pension could be worth at retirement, use our Pension Pot Calculator here →
If you are considering using some or all of your pension to buy an annuity, or income for life, when you stop work, you may consider buying a joint annuity if your spouse has little or no pension income in their own right. This means that payments will continue to be made to your wife if you die before her. If you buy a single policy, she won’t receive any income once you die.
It’s a good idea to seek professional pension advice to help you decide the best way to provide you and your wife with an income in retirement. Please call us if you require assistance.