Data from the Hargreaves Lansdown Savings and Resilience Barometer found that 49% of households where couples make retirement plans together were on track for a moderate retirement income.
“Two heads really are better than one when it comes to retirement planning with the latest data from the HL Savings and Resilience Barometer showing almost half of households where financial decisions are shared are on track for a moderate retirement income. This compares to around 40% for those households where just one person takes the decision, says Helen Morrissey, head of retirement analysis at Hargreaves Lansdown:
Putting a plan in place that works for both parties means couples know what their financial goals are and can work together to achieve them, she adds. This can also make the financial burden of planning as a couple less onerous.
“Leaving decisions to one partner leaves the other in the dark and you may not realise if you or your partner is under saving. Similarly, you could miss key opportunities to boost contributions that could make a real difference to how much you end up with in retirement.”
Morrisey also highlighted that couples should not rely on one partner’s pension at the expense of building separate pensions.
“If your partner has a very generous pension it is tempting to think you don’t need one yourself and this could work out fine if you stay together. However, if you were to split up you could find yourself approaching retirement with little, if any retirement provision,” she says.
“It may feel very unromantic to think this way when you are in a happy relationship but the prospect of a retirement where you are struggling to make ends meet is an even less pleasant prospect.”
Building up separate retirement provisions is “hugely important and incredibly tax efficient”, she adds.
“You both have your own individual set of tax allowances and so it makes sense to make full use of both where possible. If you aren’t working, your partner can still contribute up to £2,880 per year to your pension and this will attract 20% tax relief from the government bringing the contribution up to £3,600. This is really useful especially if your partner has used up their own pension annual allowance.
“If you are under the age of 40 and have a Lifetime ISA (LISA) then your partner can also contribute to that, and you benefit from the 25% bonus. It’s an ideal way of boosting not only your own financial resilience but your overall position as a couple.
“Relying on one partner’s pension also increases the likelihood of paying more tax when you draw an income in retirement. Both partners have a personal allowance of up to £12,570 before they need to start paying tax. It makes sense to use both allowances than potentially have one partner paying higher rate tax and the other none.”
