Almost three quarters (73 per cent) of people do not know they can contribute to someone else’s pension, according to research by Hargreaves Lansdown.
According to current rules a person can contribute up to £2,880 per year into a pension for a non-earning spouse, partner or child and they will receive tax relief topping it up to £3,600.
Even if your spouse/partner is working you can contribute to their pension as long as all contributions remain below their annual allowance which is whatever is lowest of 100 per cent of their earnings or £60,000.
However, data taken from an Opinium survey of 2,000 people found that two thirds of men were unaware of the possibility compared to 80 per cent of women.
Higher rate taxpayers were more likely to know – 61 per cent were aware compared to only 21 per cent of basic rate taxpayers.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: “The ability to pay into a partner’s or child’s pension is an important financial planning opportunity and yet the vast majority of us are completely unaware of it.
“Contributing to a partner’s pension during times when they aren’t working can play a vital part in plugging any gaps in their long-term saving and helping them build a resilient retirement income.
“Meanwhile, you can get your child’s or grandchild’s pension planning off to a flying start by paying into a junior self-invested personal pension pension on their behalf while they are small.”
Morrissey said it’s an incredibly tax efficient way of using money, particularly if you have used your own annual allowance.
“You don’t even have to pay in the full amount every year, making smaller contributions as and when you can will have a big impact long-term,” she said.
“If you have more money to spare and you have used your own annual allowance, then you can top up the pension of a working spouse or partner too as long as their overall contributions don’t exceed their annual allowance.”
In the case of a child, Hargreaves Lansdown said early contributions could mean they have a pension worth tens of thousands of pounds, or even more by the time they start work.
This puts them at a significant advantage over their peers who are yet to be auto-enrolled.
“It means long-term they are under less pressure to make big contributions themselves and they have more flexibility to save for other things such as a first home or a car,” Morrissey added.
“Watching their investment grow from an early age is a good way of getting a loved one engaged in their finances and could encourage them to do more by getting a stocks and shares Isa for instance.
“Pensions are not the only way to help a loved one plan for retirement. As long as they are aged between 18 and 39 you can also contribute to a Lifetime Isa that they have opened which can be used either for retirement or to help them save for their first home.”
