Pension & Relationships

Avoid a gap in pensions contributions. Can your partner help out?

There is a big gap in pensions also due to the fact that women drop out of the workforce to take care of children. Since they don’t earn, they don’t contribute.

Partners can however contribute yearly to their pensions - up to £2,880 per annum - and this is also a great tax advantage.

One of the things that makes us say Hmmm about being a woman is that if we want to have kids – which is amazing – we have to leave our jobs to do unpaid labour on 24 hour shifts for a while – which is not so amazing. Yes, yes, we know, there’s maternity pay, and childcare vouchers all that, but we also know the bottom line: women lose money by becoming mothers.

One of the more insidious ways you’ll be losing money when you’re taking a break from the workforce is with your pension. You might not feel the sting of this every month when the ghost of your pay packet shows up in your account. And you’re probably not in the mood to even think about your pension, given that pensions are all about the end of your life and when you’re spending your days giggling with tiny babies, singing songs about pigs and pretending to be an aeroplane, you actually feel pretty young and lively, despite being maybe just a teensy bit tired.

But when it comes to personal finance, it’s a life-long journey and you can’t afford to take your foot off the pedal for long. You should be saving whatever you can now, for the years to come. And it doesn’t always take much effort. You see, when it comes to pensions, as we discussed here the other day, there are quite a few cheeky tax breaks and personal finance hacks that can help that future money pot add up.

So how does this affect unemployed mothers? Well, if you’ve got a husband or wife who earns more than you and is still working while you’re at home with the kids, they could be paying in to your pension pot and still benefit from the tax breaks in your name.

Say your other half has reached the limit of their tax-free pension contributions for this year but still has some cash they want to save (especially if they’re high earners in which case they will be forced to scale back their contributions considerably under new government rules). Well, good news. They can just pay it in to yours! Because even if you’ve stopped doing paid work and are earning nothing at all, you’re still entitled to contribute £2,880 a year in to a state pension fund, and you’ll get a top-up from the government of £720 more, at the basic rate of tax relief (you get £3,600).

So next time you’re feeling a bit resentful about this challenging new unpaid job you’ve taken on, consider asking your partner to help out and invest some of their earnings in to your tax-friendly pension allowance. It’ll be doing you both a favour in the long-run.