The benefits of planning for retirement as a couple
We take a closer look at why it can make sense to plan for retirement as a couple.
Last Updated: 1 January 2003
When it comes to financial decision making, two heads are better than one. Our savings and resilience tool found that nearly half of households (49%) where partners take big financial decisions together are on track for a ‘moderate’ retirement income.
This is significantly higher than for couples where key decisions are left to one person (41%).
We see the same trend when we look at those households currently on track for a more generous retirement income, classed as ‘comfortable’. Roughly one in six (16%) households where partners make financial decisions together are on track compared to 13% where one partner takes the lead.
What does a ‘moderate’ and ‘comfortable’ retirement income mean?
The figures used for a ‘moderate’ and ‘comfortable’ retirement come from the Pensions and Lifetime Savings Association’s (PLSA) Retirement Income Standards.
The PLSA puts a ‘moderate’ retirement income at £23,300 a year for a single retiree and £34,000 for a couple. A ‘comfortable’ retirement income is estimated at £37,300 for one person and £54,500 for a two-person household.
These figures show how much easier it is for a couple to hit these standards than their single peers. A lot of that comes down to being able to share the outgoings and plan for retirement together.
The standards provide a guide to help you develop your own personal income target. Figures are after any tax deductions and based on retirees living outside of London, who are mortgage and rent free, have no social care costs and are eligible for the full State Pension.
Why it makes sense to plan together
Talking through retirement decisions as a couple can prove hugely useful. Having an open and honest conversation with your partner gives you an overarching view of your finances and know which gaps need to be plugged. You can find out what each person’s expectations for retirement are and make a plan that suits you both.
Leaving big financial decisions to one partner often means the other one is left in the dark about what decisions have been taken and when. This risks couples getting close to retirement and then finding they’re well short of where they want to be with little time left to make up ground.
It can also leave one partner severely disadvantaged in the event of the relationship ending or they might struggle to know what planning’s been made if one partner dies unexpectedly.
It’s important not to neglect one partner’s pension planning at the expense of the other when you’re planning for retirement together. One partner’s pension provision might be very generous and enough to keep you both in a good standard of living. However, if you and your partner split up then one person can find themselves approaching retirement with little pension.
Pensions also have tended to be overlooked in divorce settlements with assets like the main property taking priority. But there are several ways they can be handled. For instance, it could be split between both people or offset against another asset like the family home. Your ex-partner could also agree to pay you a portion of their pension when they retire.
There are pros and cons to these options that you would need to think about before a decision is made. But it shows another one of the benefits of both partners building up their own pension. If you stay together, you benefit from having two pensions to draw on, while giving you a valuable income safeguard should you split up.
This article isn't personal advice. If you're not sure if an action is right for you, ask for financial advice. You usually need to be at least 55 before you can take money out of your pension (rising to 57 in 2028).
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