Combined finances

March, 2021

Planning ahead for your financial future together

Some couples may prefer to keep their finances separate, while others share everything. Whichever method you’ve chosen, when it comes to retirement saving, it’s worth planning together to ensure you’ve made the most of all the allowances and benefits offered to couples.

Your golden years may ultimately be the best of your relationship if you understand each other’s future goals, needs and expectations.

SET YOUR BUDGET
The first step of planning for retirement is to look at how much money you’ll need to cover your outgoings. Start by analysing your current spending, and then identify where your spending might increase and decrease over the years.

If you have different perspectives on how extravagant your lifestyle will be, it’s best to discuss this openly and early on as you’ll need to come to an agreement. One of you might be underestimating how much you’ll need or overestimating what you can realistically afford.

Remember to plan for different circumstances. Hopefully, you’ll enjoy a decades-long retirement together, but your finances might look very different if one of you were to fall ill or die. It might be unpleasant to discuss but is essential to plan for.

ASSESS YOUR FINANCES
Next, look at the income you’ll both have from the State Pension and any private pensions. Set aside some time to trace pensions from previous workplaces that you might have forgotten about or not known an employer was paying into, as many people find extra cash that way.

Make sure you understand all of your options for withdrawing your pensions, as the amount you get back from your pension depends, in part, on which option you choose. Consider, for example, whether you want to take a tax-free lump sum of up to 25% of your pension savings at the start of your retirement, and how best you could use that.

If you have any debts or savings you haven’t mentioned to your partner, it would be wise to open up about these now.

TOP UP YOUR SAVINGS
If your existing pension savings won’t provide the income you think you’ll need, look at ways to address the shortfall. Could you make some lifestyle changes now to save more for later? If one or both of you have less than 35 years on your National Insurance record, you can make voluntary contributions to receive more State Pension.

It’s worth obtaining professional financial advice about using both of your pension allowances, and whose pension it is more sensible to contribute to. You both have an ‘annual allowance’, which is £40,000 in the 2020/21 tax year, or 100% of your income if you earn less than £40,000.

This means with the current annual allowance limit, someone paying Income Tax at the standard rate of 20% would receive a maximum sum of £8,000 of pension tax relief towards their pension pot. If you pay tax at the higher rate of 40% you would receive up to £16,000 of tax relief, while those in the additional rate band of 45% would currently receive £18,000 of tax relief.

A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL 55 (57 FROM APRIL 2028). THE VALUE OF YOUR INVESTMENT (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE. YOUR PENSION INCOME COULD ALSO BE AFFECTED THE INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS. THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE TAX ADVICE.

Affinity Integrated Wealth Management is a trading style of Buryfield Grange Limited. ‘Buryfield Grange Limited’ is authorised and regulated by The Financial Conduct Authority. Not all services provided by Buryfield Grange are regulated by the Financial Conduct Authority. ‘Buryfield Grange Limited’ is registered in England and Wales at ‘Inspire House, 20 Tonbridge Road, Maidstone, Kent ME16 8RT Company registration numbers 4568338.

What our clients say

"Many thanks for your part in all this and I will be mentioning, and I trust that this is acceptable to you, to my accountants, Applied Accountancy, that you have given me excellent advice and been most helpful and prompt about it all."

Mr Leigh-Pemberton CBE DL, Kent

What our clients say

"Ian has always been helpful and hugely knowledgeable. I am a woman on my own and I feel that Ian is someone I can trust with my finances as I find much of this area very difficult to understand. He is professional and competent, as are all his staff."

Geraldine, Surrey – Client for 7 Years

What our clients say

"Finances, investments, pensions etc are all complex issues and generally complicated & difficult to understand. We chose Ian Painter of Affinity to manage our savings because he is very professional in his approach and his knowledge covers every aspect of the market to offer the best advice to secure our investments. We are very happy with the service we are receiving from Mr Painter and his team and have no reservations in recommending him to others."

Martyn, Berkshire – Client for 5 Years