HMRC’s ‘little-known’ rule can boost pensions by £720 a year | Personal Finance | Finance

Thousands may be unaware of HMRC’s ‘little-known’ rule that can boost a partner’s pension by £720 a year.

Just over a third of people know they can contribute to their partner’s pension, a move that could add up to an extra £720 annually to their savings pot, new research reveals. Hargreaves Lansdown found only 34% were aware of this valuable rule, with awareness especially low among those aged 55 and over, at just 25%. Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, called it “a little-known benefit that can make an enormous difference” to retirement planning.

Under the rule, contributions of up to £2,880 a year can be paid into a non-working spouse’s Self-Invested Personal Pension (SIPP). Thanks to Government tax relief, the pension pot receives a top-up to £3,600 annually.

Ms Morrissey said: “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.”

Even couples where both partners work can take advantage, provided contributions don’t exceed the individual’s annual allowance, which is generally £60,000 but can be lower for high earners or those accessing their pension flexibly.

However, Ms Morrissey noted: “The problem is, not enough of us know about it. Only a third of people knew that this was something they could 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 also appear to be more aware of the rule, with over three-quarters of additional rate taxpayers saying they know about it.

The rule extends beyond partners. Contributions can also be made into a child’s Junior SIPP, providing a long-term boost.

According to Hargreaves Lansdown’s calculations, making contributions of the full £3,600 per year could see children with a pension pot of £104,000 by the time they are 18.

Ms Morrissey said: “This early planning could leave them in a much better position.”