What is a SIPP?
Question asked by Ms C Mitchell
My husband is a stay-at-home father to our four children while I go out to work, but I’m not sure what will happen when he comes to retire.
I’m part of my employer’s pension scheme and am earning National Insurance contributions towards the state pension, but my husband isn’t making any provisions because he stays at home. I was wondering if I could set up a joint pension for both of us so we can both have an income when we’re older?
The short answer is no, there aren’t joint pension schemes for married couples. Pensions are held in separate names, not joint names.
However, once you reach the age of 55, you have the option to use your retirement savings to buy a joint annuity. This is an income for life, which will be paid to a designated dependant, usually your spouse or partner, after you die.
You can choose how much income you want them to receive as a percentage of the annuity that you receive during your lifetime. This can be anything up to 100% of the income you get.
Bear in mind that with a joint pension, your starting income will be lower than if you’d opted to buy an annuity solely for yourself.
The biggest risk of opting for joint annuities is that if the dependant you’ve designated to receive an income dies first, you’ll have a lower income for the remainder of your life.
If you’re currently receiving child benefit, your husband may be entitled to some National Insurance credits for the time he has spent out of work caring for your children, which could help him build up entitlement to the full state pension.
Your husband could also choose to start his own private or personal pension, even though he doesn’t work. He’ll still receive tax relief at 20% on his contributions, even though he doesn’t pay tax. If he does set one of these up, the maximum he can pay in is £3,600 a year, made up of his contributions of £2,880 and topped up by a HMRC’s contribution of £720.