Helen Morrissey, head of retirement analysis. Hargreaves Lansdown: “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 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. It’s a great way to make 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. Overall, only a third of people knew that this was something they can do. Awareness seems to be more widespread among younger people, with 43% of those who are aged between 18-34 being aware compared to just 25% of those aged over 55.
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.
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.
Making contributions of the full £3,600 per year could see them with a pension pot of £104,000 by the time they are 18. This puts them well ahead of their peers who are yet to be auto-enrolled. Overall, this early planning could leave them in a much better position.
A Junior SIPP can also be a great way of starting your child’s financial education journey. You can show them how their SIPP is growing and the companies they are invested in. It can really help them get to grips with investment and start a lifelong habit that can serve them very well. Having built up a decent pension through their Junior SIPP can also give them a bit more space in their budget to save for other key milestones such as a car or first home and help them build their financial resilience overall.”
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