Senior couple sitting on a park bench in autumn

Retirement planning as a couple can be difficult. You may have very different ideas about when you want to retire and how you want to spend your time. While it’s something of a taboo subject, understanding what you both want out of retirement and how you’ll create an income can help you get the most out of it.

A survey conducted by LV= found 78% of married people have no idea what their spouse’s pensions are worth. In fact, almost half (47%) have not spoken to their spouse about their retirement plans. While you may not have discussed how much you’re putting away for retirement, planning together often makes sense.

4 reasons to plan your retirement as a couple

1. Create the retirement lifestyle you want

When you think about your retirement, what does it look like? When do you hope to retire?

Without a clear picture of what you want retirement to be, it can fail to live up to your expectations. Setting out what you want your lifestyle to look like can help you get the most out of the next chapter of your life. If you’re planning with a partner, it is just as important to understand what they are looking forward to in retirement as well.

You may have very different goals, from the date you’d like to give up work to the life you’ll build. A conversation about what retirement will look like now can help you create a plan that suits both of you.

It’s common to focus on the big things when thinking about retirement, like a once in a lifetime trip or other big-ticket expenses. However, the day-to-day lifestyle you create in retirement is crucial for long-term happiness and fulfilment too.

2. Understand how to create a retirement income

In retirement, will you pool both your incomes to pay for essential outgoings? Will you share a disposable income?

Many couples will share income and expenses while they’re working and continue this into retirement. If you’ll pay for retirement as a couple, it’s important that you understand the steps you’re both taking to create an income when you give up work. It can help ensure you identify gaps sooner, enabling you to take steps to close them where possible. You could also find that collectively you’ll have more saved for retirement than you thought, allowing you to retire sooner or increase your planner income.

3. Make the most of allowances as a couple

Planning together can reduce your tax bill and help you make your money go further. The LV= survey found that 85% of non-retired married people are not aware of the tax efficiencies of planning retirement together. By not planning together, they could be missing out on reducing their tax liability.

While you’re still saving for retirement, adding to your partner’s pension can make sense. The Annual Allowance limits how much you can tax-efficiently save into your pension each tax year. This is usually £40,000 or your annual income, whichever is lower. If you may exceed this threshold, adding to your partner’s pension can increase how you’re saving tax-efficiently.

Once you’re retired, planning together continues to make sense. Money withdrawn from your pension may be subject to Income Tax when you exceed the Personal Allowance (£12,570 in 2021/22). Spreading withdrawals across both your pensions can help you make use of your Personal Allowances to reduce the amount of tax paid.

Depending on your assets and goals, there may be other allowances that can help you create a long-term income that minimises tax. Please get in touch with us if you’d like to discuss how to save for retirement efficiently.

4. Ensure the long-term security of you and your partner

While it can be difficult to contemplate, it is important to consider how financially secure you would be if your partner passed away, and vice versa. Not planning as a couple can leave a surviving partner in a vulnerable position and potentially struggling financially.

By considering what could happen, you’re in a position to take steps to ensure long-term security for both of you, even if the unexpected happens. This could include ensuring your partner will inherit your pension by completing an expression of wishes, or purchasing a joint annuity so they would still receive a regular income if you passed away.

Start building your retirement plan as a couple

It can be difficult to know where to start when planning your retirement, especially if you have different goals for your partner. We’re here to help you put a long-term plan in place to help you get the most out of your retired life, whether you’re ready to retire now or are still saving for the milestone.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.