‘Life-changing’ pension boost could leave couples £2million better off

This significant uplift stems from combining pension tax relief with sustained investment growth and additional contributions, which compound far more powerfully when approached as a joint effort rather than separately.

The calculations arrive just ahead of Valentine’s Day, offering couples a compelling reason to discuss their financial futures together and take advantage of allowances available to married individuals and civil partners.

Rathbones calculated that if an additional rate taxpayer pays the full £60,000 yearly allowance into their own pension and also puts £20,000 into their spouse’s plan, the pair could build a combined pot of about £2.6million over 20 years.

Once tax relief is taken into account, that works out as net contributions of £33,000 a year from the higher earner and £12,000 for their partner, assuming the spouse is taxed at the higher rate.

Close to half of the final total comes from the government top up, which is invested and then grows through compounding.

If the higher earner used the £60,000 allowance only for their own pension and made nothing for their partner, the fund would come to just under £2million after the same period.

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However, couples who maximise both partners’ full £60,000 allowances could see their combined retirement savings hit £4million over the same period.

That represents a potential gain of nearly £2million compared to the scenario where only one partner contributes.

Ryan Jackson, Associate Financial Planning Director at Rathbones, said: “The phrase ‘better together’ couldn’t be truer when it comes to spouses and their finances. Our analysis shows that by simply making the most of the tax allowances and reliefs already available, spouses can build a genuinely lifechanging sum of money.”

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He acknowledged that many people feel uncomfortable discussing finances, even with those closest to them.

“We know from experience that people can be hesitant when talking about money – even with their nearest and dearest – but when we show them the potential financial benefit in pounds and pence, the impact is undeniable,” Mr Jackson added.

He described marriage as “an incredibly effective financial planning tool” that provides access to tax allowances and reliefs unavailable to individuals.

The Rathbones expert outlined several practical steps for couples looking to boost their financial position together.

Mr Jackson urges partners to begin by agreeing what they are aiming for, from near term priorities to retirement and estate planning. Openness about income, debts and spending is vital so any strategy is realistic and avoids shocks later.

Pensions are one of the biggest opportunities. Each spouse has a £60,000 annual allowance and higher and additional rate taxpayers can benefit from generous relief. When both partners use those limits, or when one contributes on behalf of the other, two sets of tax advantages are in play.

ISAs can also be aligned, giving couples £40,000 of tax free saving capacity each year, while assets held outside wrappers may be shifted between spouses to make better use of lower tax bands.

Mr Jackson added: “We know from experience that people can be hesitant when talking about money – even with their nearest and dearest – but when we show them the potential financial benefit in pounds and pence, the impact is undeniable.”

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Couples can also shelter £40,000 annually through coordinated ISA contributions, with each partner able to invest £20,000 tax-free.

Tax-free transfers between spouses allow couples to share capital gains and dividend income more efficiently.

Careful inheritance planning could enable them to pass on up to £1million without tax liability.