A surprising fact about pensions – You don’t need to be earning to have one
Roy Osbourne · Posted on: August 29th 2025 · read
When most people think of pensions, they picture something that is tied to a job, whereby a percentage of their salary is set aside in a pot each month and boosted by employer contributions. But here’s a surprising fact: you don’t have to be employed to benefit from a pension: children, stay-at-home parents, and others, can all have a pension.
For parents and grandparents, this provides a powerful yet often overlooked way to invest in a loved one’s future, potentially turning small contributions today into significant savings for later in life, with the added benefit of tax advantages.
With Pensions Awareness Week in September 2025 throwing a spotlight on the importance of pension planning - now is the perfect time to understand how pensions for non-earners work, how the rules make them incredibly tax-efficient, and how even small contributions can make a huge difference over in the long-term.
Why have a pension?
"For many years pensions have been regarded as an excellent way to save for retirement, whilst also being a generous tax tool for those who pay income tax."
"Personal pensions make it possible to reclaim income tax via ‘tax relief at source’ at 20% basic rate and through your tax return for higher and additional rate income taxpayers. Contributions paid by a company to an employee’s pension (including directors and business owners) attract Corporation Tax relief."
So, contributing to a pension is really tax efficient as well as a great way to build up your retirement savings.
Pensions for non-earners too?
Since 6th April 2001 when Stakeholder Pensions were introduced, it has been possible for non-earners from birth to age 75 to pay into a pension, and get tax relief on the contributions, even though no income tax has been paid by the owner of the pension.
Sounds too good to be true doesn’t it? Getting tax back from HMRC when no tax has been paid in the first place - but it is true!
Stakeholder Pensions were launched with the aim of encouraging more people to save for their retirement. Employers with 5 or more employees were required to provide access to a Stakeholder Pension via payroll. There was a cap on charges, and very low minimum contributions were permitted. They were promoted as a low cost, flexible solution to pension savings, and to a significant degree they were.
But the legislation fell short of making pension contributions compulsory. That didn’t happen until Workplace Pensions (auto enrolment) was introduced in 2012.
To make Stakeholder Pensions attractive to all, contributions would be limited to 100% of the net relevant earnings or £3,600 gross per annum, whichever was the lower.
This was the significant clause that opened a door for everyone to have a pension, even if they had no earnings and paid no income tax, £3,600 gross per tax year can be paid into pension. This would be subject to tax relief on the payment meaning a non-earner could pay £2,880 into a Stakeholder Pension and this would be grossed up to £3,600 by tax relief.
The rules have not changed.
Today a newborn baby can have a Stakeholder Pension. The parents (or grandparents) can contribute £2,880 per tax year (£240 per month) and HMRC will gross that up to £3,600 (£300 per month).
Here is a summary of the rules:
Pension Contributions for Non-Earners
Annual Contribution Limit: Non-earners can contribute up to £2,880 per year into a personal pension.
Tax Relief: HMRC adds 20% tax relief, boosting the total contribution to £3,600 gross.
Eligibility: You must be a UK resident and under the age of 75 to qualify for this tax relief.
Third-Party Contributions
You can contribute to a pension on behalf of a non-earning spouse, partner, or child.
The same £2,880 net / £3,600 gross limit applies.
The key point is that everyone, whether you are earning or not, can have a pension. For those who are non-earners: children, grandchildren, non-working spouses, etc. pension contributions can be paid, and tax relief will be granted at 20%.
Carry Forward Rules
Carry forward allows earners to use unused pension allowance from the previous three tax years.
However, non-earners cannot use carry forward because it requires having had earnings in those years.
Pension Options
Personal Pension: A standard option for non-earners.
SIPP (Self-Invested Personal Pension): Offers more control over investments, suitable for those comfortable with managing their own pension.
Make your pension work harder: Optimise your contributions
It’s never too early to plan for the future
Setting up a pension for a non-earner, whether that’s yourself, a spouse, a child, or a grandchild, is one of the most tax-efficient and forward-thinking financial decisions you can make.
The rules are simple, the benefits are generous, and the earlier you start, the more time those contributions have to grow significantly.
How we can help you
Should you wish to understand more about pensions and how to make the most of the tax advantages, please contact a member of the MHA Wealth team for further guidance, or to discuss any other investment and financial planning needs you have.
For more information
Contact the teamImportant information
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This is a marketing communication for general information only, and is not intended to be individual investment advice, a recommendation, tax, or legal advice. The views expressed in this article are those of MHA Wealth or its staff and should not be considered as advice or a recommendation to buy, sell or hold a particular investment or product. In particular, the information provided will not address your personal circumstances, objectives, and attitude towards risk.
This information represents our understanding at the time of publication of current law and HM Revenue & Customs practice. Tax assumptions and reliefs depend upon an investor’s particular circumstances and may change if those circumstances or the law change. You are therefore recommended to seek professional regulated advice before taking any action.
