Couples with a non-working partner could receive up to £720 a year in pension tax relief under current Labour Party government rules, even if that partner does not pay any Income Tax themselves. The relief is available through HMRC regulations that allow someone with no earnings to contribute up to £2,880 a tax year into an eligible relief-at-source pension, with the pension provider claiming basic-rate tax relief of £720 from the Government.
People who take time away from work to raise children, care for relatives or manage a household can easily go years without making meaningful private pension contributions. This can create a significant gap between partners by retirement, according to money-saving expert Thomas Drury at The Investors Centre.
Under the rules, the total amount entering the pension reaches £3,600 when the £720 tax relief is added. A spouse, partner or another person can also make contributions on the pension holder's behalf.
How the tax relief works for non-earners
Thomas Drury, money-saving expert at The Investors Centre, said: “It sounds counterintuitive because we describe this as pension tax relief, so naturally people assume you must first be paying Income Tax to receive it. But someone with no earnings can still pay £2,880 into a qualifying relief-at-source pension during the tax year and have that topped up by £720, bringing the gross contribution to £3,600.”
Drury highlighted that the £720 is particularly easy for couples to overlook when one partner takes several years away from employment. He said: “A family may understandably focus all of its pension saving on the person earning the salary, while the partner looking after children or caring for relatives contributes nothing to their own pension. Over time, that can leave one person building a sizeable retirement pot while the other accumulates very little.”
How couples can maximise the benefit
Drury explained how the rule becomes particularly useful for couples: “If one partner is working and the other has no earnings, the working partner could potentially provide the £2,880 that goes into the non-working partner's pension. The provider then claims £720 of basic-rate tax relief, taking the pension contribution to £3,600. That works out at £240 a month contributed by the household and £60 a month added through tax relief if you spread the maximum contribution evenly across the year.”
He stressed an important distinction: “The £720 belongs inside the non-working partner's pension. The working spouse does not personally receive an extra £720 tax refund simply because they supplied the money.”
Long-term impact of missed relief
Drury quantified the potential long-term benefit: “One year of missed relief is £720. Five years represents up to £3,600 of Government pension top-ups that could potentially have been added, before considering any investment growth on that money. Ten years would mean up to £7,200 in tax relief alone.”
However, he cautioned against overextending: “That does not mean somebody should suddenly put money into a pension that their household cannot comfortably afford. Pension money is designed for retirement and generally cannot be accessed like ordinary emergency savings. Families should make sure they have enough accessible cash for bills and unexpected costs first.”
Where a household already has room in its budget for long-term saving, Drury suggested it is worth questioning whether putting every spare pension pound into the working partner's account is necessarily the best approach, given the available relief for non-earning partners.
