This is true and it's legal.

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If you run a business, (including self-employment), and you pay a member of staff (including your husband, wife, or domestic partner) a salary that falls between the 'Lower Earnings Limit' and the 'Primary Earnings Threshold' the employee builds up an entitlement to a retirement pension. Neither the employer nor the employee will need to make any NIC payments.

Naturally, all the normal criteria relating to business payments apply. Always take advice from someone suitably qualified.

Additionally it is necessary that the employer operates a PAYE scheme and issues forms P60 etc at the end of each tax year. The employee will not qualify for a pension if this is not done.

To give you some idea of the levels of income involved, in the year to 5.4.2007 the figures are

Lower Earnings Limit: £84 a week, £364 a month, or £4368 a year

National Insurance Contributions start at: £97 a week, £420 a month, or £5035 a year

In the same year the personal allowance is £5035.

And remember, if you run a limited company and you are an employee of that company, the above will apply to salary paid to you, too.

Please don't forget to read our craftily worded disclaimer. Please seek advice from a suitably qualified person before taking or failing to take any action.