New research shows that just 34% of people are aware of a tax benefit that could save them thousands… and that figure drops to just 25% among those aged 55 and over

New research from Hargreaves Lansdowne, using data taken from a survey of 2,000 people, has shown that only 34% of adults in the UK are aware that you can pay money into the pension of a partner or child – potentially gaining tens of thousands of pounds in tax relief.

In fact, you can contribute up to £2,880 per year to the SIPP of a non-working spouse or child – and the government will top it up to £3,600 with tax relief.

HL says that:

• Younger people were more aware of this benefit than their older counterparts – 43% of those aged 18-34 compared to just 25% of those aged 55 and over.
• 78% of additional rate taxpayers were aware.
• This compares to 61% of higher rate taxpayers and 29% of those paying basic rate tax.

Helen Morrissey, head of retirement analysis. Hargreaves Lansdown, said: “The ability to pay into a partner’s pension is a little-known benefit that can make an enormous difference to your family’s retirement planning.

“You can pay up to £2,880 per year into the SIPP of a non-working spouse. Even though they are not working, and so not paying tax, they will still get a tax relief top up from government taking it up to £3,600. It’s a powerful way to boost the retirement planning of a loved one who is taking time out of the workforce to care for children or other loved ones and can go a long way towards closing the gender pension gap that continues to yawn widely.”

You can still make payments to your partner’s pension even if they are working ­– as long as total contributions do not exceed their annual allowance. That makes it a great way to gain the most of any spare cash you have if you have made the most of your own pension allowances.

The problem is not enough of us know about it, although higher earners tend to be much more aware – well over three quarters of additional rate taxpayers said they knew about it. This may well be because they are making use of it. 61% of higher rate taxpayers knew about the rule but only 29% of basic rate taxpayers did.

And there’s more…

The rule can be expanded even further than that of a spouse or partner. You can also contribute to the pension of a child through a Junior SIPP and get their retirement planning off to a flying start.

As with a non-working spouse, you can contribute up to £2,880 per year to a Junior SIPP and they will receive the government tax relief top up to £3,600. Even small contributions will make a difference.

Combined with tax relief and long-term investment growth, these contributions can grow and give your child a real leg up the retirement planning ladder. Total contributions of the full £3,600 per year, for instance, could see them with a pension pot of £104,000 by the time they are 18… a great starting point for THEIR future retirement.