News, Culture & Society

Why do tax and benefits rules for older unmarried couples clash?

Why do tax and benefit rules for older unmarried couples contradict each other – and always at OUR expense? Steve Webb replies

I am 69 and made 36 years of contributions towards my state pension.

I’ve lived with my partner for 38 years and we had a mortgage together but never married.

I can’t get pension credit because we are classed as married and his pension is taken into consideration.

Retirement finances: Why do tax and benefit rules for older unmarried couples contradict each other

Meanwhile, my partner has to pay a little tax on his miner’s pension, which he already payed tax on when working.

When I then try to give him my tax allowance so he doesn’t have to pay tax, I’m told I cannot do that because we’re not married.

We are either one or the other. This system isn’t fair.


Steve Webb replies: You raise an important point about the rather unfair way in which different parts of the system treat couples who live together.

There is however a possible way round this (short of getting married) which you may want to consider.

Starting with the benefits system, this has always looked at people as a household, even if they are not legally married.

The argument would be that if you are living ‘as a couple’, then you probably have joint bills which have to be met from your combined income.

If your joint income is lower than your needs as a couple then you could get pension credit, but you are assessed as a household.

Steve Webb: Find out how to ask the former Pensions Minister a question about your retirement savings in the box below

Steve Webb: Find out how to ask the former Pensions Minister a question about your retirement savings in the box below

The Government’s position would be that if people were to be assessed for pension credit as individuals you could have a situation where someone who shared a house with a millionaire still got benefit because they had no income of their own.

The tax system now takes a different approach, although this has changed over time.

Before 1990, the income tax system was also largely based on household incomes and on legal marriage. There was even something called a ‘married man’s tax allowance’ and a ‘wife’s earned income allowance’.

By the late 1980s this was seen as increasingly old-fashioned as it didn’t treat wives as independent people and gave them little privacy over their tax affairs.

In 1990 this system was scrapped and instead replace with a system of independent taxation of husbands and wives. Under independent taxation, with one important exception, whether you lived with someone was irrelevant.

You were taxed on your own income, regardless of the income of a partner or spouse.

The one important exception is that there was still a tax allowance for marriage when the change was made in 1990. This ‘married couple’s allowance’ was gradually phased out but in 2015 the Government re-introduced something called the ‘marriage allowance’.

This is only available to married couples (and civil partners) and allows a lower earner to transfer some of their unused tax allowance to a higher earning spouse, subject to certain rules.

In your case, as you have discovered, because you are not married you cannot take advantage of the marriage allowance. But because you are living together you are treated as a couple for pension credit purposes so do not qualify for benefit.

I agree that this feels inconsistent and unfair.

Unless and until they change the rules you are largely stuck with the current situation unless you are willing to take a step which has only recently become possible.

Since December 2019, opposite sex couples who do not wish to marry can now register a civil partnership. Previously this option was only available to same sex couples. You can read more about this here. 

Civil partners are treated by the tax system in the same way as married couples. If you were prepared to register a civil partnership you could then qualify for the ‘marriage allowance’.

Although you would still be treated as a couple for benefit purposes and would not qualify for benefit you would at least get the same tax advantages available to married couples.

Obviously it will be a personal decision whether this is something that you and your partner wish to do.

Ask Steve Webb a pension question

Former Pensions Minister Steve Webb is This Is Money’s Agony Uncle.

He is ready to answer your questions, whether you are still saving, in the process of stopping work, or juggling your finances in retirement.

Steve left the Department of Work and Pensions after the May 2015 election. He is now a partner at actuary and consulting firm Lane Clark & Peacock.

If you would like to ask Steve a question about pensions, please email him at

Steve will do his best to reply to your message in a forthcoming column, but he won’t be able to answer everyone or correspond privately with readers. Nothing in his replies constitutes regulated financial advice. Published questions are sometimes edited for brevity or other reasons.

Please include a daytime contact number with your message – this will be kept confidential and not used for marketing purposes.

If Steve is unable to answer your question, you can also contact The Pensions Advisory Service, a Government-backed organisation which gives free help to the public. TPAS can be found here and its number is 0800 011 3797.

Steve receives many questions about state pension forecasts and COPE – the Contracted Out Pension Equivalent. If you are writing to Steve on this topic, he responds to a typical reader question here. It includes links to Steve’s several earlier columns about state pension forecasts and contracting out, which might be helpful.