Something we always stress to our clients, and in particular to married couples/civil partnerships, is that they should treat their finances as one unit rather than seeing themselves as two individuals. That way, they can make their combined finances more tax-efficient.

As a simple example, if one spouse is a higher or additional rate taxpayer and the other is a basic rate or nil rate taxpayer, it makes most sense to keep taxable savings and investments in the name of the lower taxpayer.

So, where does this leave us with pensions? Irrespective of whether they are a 20%, 40% or 50% taxpayer, we would advise the majority of people to make the most of any employer pension contributions, including any matching contributions. For example, an employer might offer a standard 5% pension contribution and then pay in a further 3% if the employee pays in 3%. However, beyond that we are quite lukewarm about pensions for basic rate taxpayers.

There are plenty of different ways of saving for retirement and pensions are just one part of this picture. Getting basic rate tax relief, locking money up until age 55 at the earliest and then paying basic rate tax on the pension income at retirement doesn’t feel particularly attractive. But, getting 40% or even 50% relief when you put your money in and then paying basic rate tax in retirement sounds altogether more appealing.

Therefore, if one spouse will get 40% or 50% tax relief and the other only 20%, there is a clear advantage of focusing on the higher earner’s pension.

As for the drawbacks of focusing pension contributions in one spouse’s name, whilst one would expect pensions to get factored into the overall household wealth in the event of divorce, there may be reasons why this might not happen in certain cases. However, we are not qualified to give legal advice so if you are concerned about this aspect you should seek legal opinion. If a couple would both get 20% tax relief (remember that even if you aren’t working you can still pay in £3,600 p.a. gross and get basic rate tax relief on this) on money going into pensions then there is less advantage on focusing on one person’s pension over the other’s.

Apart from that, as long as a couple focus their combined retirement planning around having enough money in lots of different sources, such as pensions, ISAs, mortgage-free home, cash savings, taxable investments, National Savings & Investments and so on, they should be able to structure a tax-efficient and flexible retirement income for both parties.