Marvin OnumonuCouples who plan their finances together could add £2m to their pension pots over 20 years, according to findings from Rathbones.
The firm found that by coordinating pension contributions, tax planning and long-term goals, spouses can make the most of tax relief and investment growth.
Rathbones calculated that a married couple or civil partners could build a joint pension pot of about £2.6m in 20 years if one partner, an additional-rate taxpayer, pays the full £60,000 annual pension allowance and also puts £20,000 into their partner’s pension each year.
With tax relief, this means net annual contributions of £33,000 for the additional-rate taxpayer and £12,000 for their higher-rate taxpayer partner.
Nearly half of the uplift came from pension tax relief, when reinvested and compounded.
If only the additional-rate taxpayer pays in £60,000 a year, the total pot would be just under £2m after 20 years.
These figures assumed the partner getting contributions is a higher-rate taxpayer, tax relief is reinvested, and investments grow at 5% a year.
If the additional-rate taxpayer paid the full £60,000 annual allowance into both pots, the combined pension could hit £4m in 20 years.
These scenarios only looked at contributions from the main earner and amounts paid into their partner’s pension, not any separate contributions made by the partner.
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.
“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.”
Jackson added: “Even those who put only part of this approach into action can be significantly better off today and far into the future.
“Marriage itself is an incredibly effective financial planning tool, because it gives couples access to a range of tax allowances and reliefs that simply aren’t available to individuals.”
