A lot of people don’t realise that they can pay into a personal pension on behalf of their spouse, partner, children, or other family member. There are different groups of people who could benefit from someone paying into a personal pension for them, including:

• For couples, it helps to increase their joint income during retirement
• For children, there is a maximum chance of growth for their pension pot
• For a person that is a carer or looking after children and not earning

Information collected by Statista (2023) shows that the largest difference in annual earnings can be found in older age groups. Men in their 50s earn around 37,877 pounds a year, while women earn approximately 30,603 pounds per year. This means that women often save less in their pensions than men.

Every year you can save up to £60,000 into your own pension while benefiting from tax relief. On top of that, you can pay up to £60,000 or the equivalent of your partner's annual salary into their pension — whichever is lower.

If your partner is not working, you can still pay up to £2,880 a year, which would rise to £3,600 after tax relief has been applied.

Another benefit of paying into someone else’s pension pot is that you can make substantial savings on your tax bill.  If contributions are within the annual allowances, no tax is payable on any growth. Tax is only paid at the marginal rate of the pension owner when they take money out.

In addition, you can claim tax relief on any money you pay into a pension, whether that is your own or someone else's. 

Tax relief is paid at the rate of income tax of the person receiving the money and not at the rate of the person making the payment.

This makes it an attractive option where one partner is a higher earner, as paying into their pension allows the one on the lower tax rate potentially to benefit from extra tax relief. 

Reference

Statista (2023) Median annual earnings for full-time employees in the United Kingdom in 2022, by age and gender. https://www.statista.com/statistics/802183/annual-pay-employees-in-the-uk