Couples and Money: Combined Finances

Some couples choose to separate their finances whilst others decide to share all of their finances. Whatever you have chosen, when it comes to saving for retirement, you should look to plan together. This will ensure that you take advantage of the allowances and benefits available to married couples living in the UK.

If you plan ahead, you will find that your retirement years are some of the best of your life but how do you plan for retirement together?

Put a Budget in Place

When planning for retirement, the first thing you should do is ensure that you have enough money to cover your outgoings. Begin by looking at your existing spending and then look at what might increase and what might decrease as the years pass by. You might have a different outlook when it comes to the things you want to do, so you should talk about this as early as possible. One of you might think that you need less money whilst the other might think that you need more, so it helps to agree on what you can afford.

You will need to consider a number of circumstances when planning your financial future. This will ensure you have a number of good years together in retirement but your finances might change if one of you becomes ill or passes away. So, it is important to talk about how best to pass on your estate to your spouse and your loved ones in the event of death to ensure the right plans are in place.

Assess Your JOINT Finances

Now you will need to consider what income you will both receive from your State Pension as well as private pensions you have. Put aside time to follow up on any pensions you have held in previous workplaces that you might have forgotten about or might not have even known about as many people identify extra money this way.

You should ensure that you are aware of your options when it comes to withdrawing your pensions. This is because the amount you receive from your pension will depend on the option that you choose. You might choose to take a tax-free lump sum of as much as 25% of your pension savings when you start retirement, although there are other options available. If you have debts or savings that you have not mentioned, then now is the time to discuss them.

Add to Your Savings

If you won’t receive the income you believe that you need from your pension to live comfortably during retirement, then you can look at ways in which you can make up for the difference. Can you make lifestyle changes now in order to save more for the future?

If one or both of you have fewer than 35 years on your National Insurance record then you can make voluntary contributions so that you will receive more State Pension.

We recommend you obtain professional financial advice on whose pension it is more sensible to contribute to and how best to use your pension allowances. With regards to pension allowances, in the 2021/22 you will both have an annual allowance of £40,0000 or 100% of your income if you earn less than £40,000. What this means is that with the current annual allowance limit, for someone who is paying the basic tax rate of 20%, they would receive a maximum amount of £8,000 of pension tax relief towards their pension. If you pay the higher rate of tax of 40% then you would have a pension tax relief of £16,000 whilst those who pay the 45% tax rate, they would receive pension tax relief of £18,000.

So, it is really important that you both consider your finances when it comes to pension planning and retirement as this will enable you to plan for the life you want to live.

NEED HELP WITH YOUR PENSIONS AND JOINT RETIREMENT PLAN?

Discussing your financial plans together will be critical to creating a better future together. If you would like to understand your pension and retirement options as well as how to maximise your pension savings, contact us today to discuss your individual circumstances.

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