Tax Insider Tip: Making Pension Contributions For Family Members

Most people are unaware that the Government allows contributions of up to £3,600 gross (£2,880 net of basic rate tax) to be made into a registered pension scheme regardless of your level of income or age.

 

So if you want you can contribute into a pension scheme for your non-working spouse, children, etc., and they are deemed to have made the contribution net of basic rate tax even if they are non-taxpayers.

 

John wishes to increase his family’s pension fund at retirement and makes a contribution of £2,880 into his non-working wife’s pension fund.

 

This is worth £3,600 in the scheme and he is able to obtain a tax saving of £720 by doing so.

 

He also contributes £2,880 into each of his three children’s pension schemes which again is worth £3,600 in each of their schemes, receiving a further £720 tax advantage in each scheme (£2,160 in total).

 

As the children will have their pension scheme running for much longer than someone who does not start a pension until they start work, they will have a considerably bigger pension fund at retirement than, say, someone starting their pension funding at the typical age of 30.