Hi Rico,
As your wife does not have any net relevant earnings the maximum pension contribution you can pay for her is £3,600 gross (£2,808 net) in order to get tax relief. She will get basic rate tax relief at 20% only up to this amount. Anyway, you should look to make the pension contribution in your name as you have stated that you are a higher rate taxayer, just. Well, the good news is that you can pay in 100% of your salary, up to £50,000, each year and get the following tax relief:
You will get 20% tax relief (for every net payment of £80 the pension provider will pay £100 into your pension as the government will pay £20 tax relief).
However, as you are a higher rate taxpayer you are entitled to an additional 20%, which gets treated as a tax reducer. You have to add the pension contribution into your annual self-assessment tax return and your tax income tax liability will be reduced by 20% of the gross pension contribution you make.
Please ensure that you have completed a nomination of death benefits form, or even a pension trust, to make sure that the pension gets paid to your wife quickly in the event of your death.
This is qute a complicated area so I would suggest that you get in contact with a local IFA who should be able ot help as there will be other issues to consider other than just the tax relief; many offer a free initial meeting so it should be relatively inexpensive. They could even look at your current pension to see if it is the best one for you (if you are in an final salary scheme then just take out a AVC scheme for you additional pension contributions and don't bother talking to an IFA as these are the dog's danglies of pensions!) however, if you are in a money purchase (personal pension or occupational pension ran by your employer) you may be able to get a similar product at a lower cost so more of your money goes into your retirement savings and not to the shareholders of the pension provider.
I appreciate that your wife will still not have a pension in her own name. However, should you die all of your pension can go to her (as a tax free lump sum if you pop your clogs before taking anything from yoru pension). It is more complicated after you have taken benefits but as you've got young kids I assume you are still some way from retirement? However, if you get divorced she will be entitled to a share of your pension anyway so I would think the extra tax relief would be preferential to having a separate pension in her own name.
Anyway, lunch break over & back to the grind!
Hope this helps?
