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5 major retirement planning issues couples face, and what to do about them

We take a look at the major retirement planning issues couples face, and give some top tips to avoid any nasty shocks.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

This article is more than 6 months old

It was correct at the time of publishing. Our views and any references to tax, investment and pension rules may have changed since then.

Lots of couples do their financial planning together, like saving for a house, affording to start a family, paying off debts, setting aside money for holidays, and even building a university fund for the kids. But with so much to think about, it’s easy to overlook the golden years.

If you’re in a couple, half of your relationship could be spent as retirees. So it’s important to discuss your retirement plans with your partner. You might find your retirement plans aren’t compatible or your aspirations for later life are worlds apart.

To help you avoid any nasty surprises when you stop working, we uncover the five major retirement planning issues couples face and how to overcome them.

This isn’t personal advice. If you’re unsure what’s best for your situation, please ask for financial advice.

1. Taking a pension break

People take career breaks for lots of different reasons – one of the most frequent examples is looking after children. As soon as a couple has children, one parent often takes a break, and then reduces their hours. This is likely to end up with one person having a much smaller pension than the other, which is a real risk for one of you at least. But this doesn’t have to be the case. There’s a handy pension trick worth knowing about.

If you keep your pension contributions up while you’re on paid parental leave, your contributions will normally be based on your actual earnings during that period, which are likely to be less. However, any employer contributions will continue to be based on the level of earnings you were receiving immediately before any paid parental leave started. But if you stop paying into your pension, then your employer might stop paying in too.

If your employer runs a salary sacrifice scheme for payments into your pension, then you’re likely to be in an even better position. This is because all contributions are paid by your employer, therefore all contributions made during paid parental leave will be based on your pre-parental leave earnings. Your employer will have to make up any shortfall.

If you take a longer break, or the reason for the break isn’t caring for children, make sure you talk about how you’ll keep up your pension contributions on a lower pay cheque.

Remember you can’t usually access the money in your pension until you’re 55 (57 from 2028). Pension rules can change and any benefits will depend on individual circumstances.

2. Timing – when should you retire?

It’s not just about how much money you save, having different expectations about when to finish work could be problematic too.

A decade ago, the question of when to retire didn’t really exist. Lots of workers simply retired when their employers told them to – usually at 65. In 2011, this all changed when a new law was introduced, abolishing the default retirement age. Lots of people were forced to take more control over their retirement plans, and it gave them much more flexibility.

But this freedom means people choose to finish work at different times. In our research*, just under half of men said they expect to retire at age 65 or earlier, compared to just over a third of women. This could cause problems if you’ve assumed you’ll retire at the same time so you can spend more time together, for example.

3. Semi-retire or fully retire?

Another compatibility issue between couples is whether to ease into retirement gradually or not. According to our research, more women expect to enter into a phased retirement, with a quarter saying they expect to work part-time between age 50 and State Pension age and only 16% of men saying the same.

Full retirement might not seem like a big issue, other than the obvious financial impacts. However, suddenly breaking those colleague bonds and regular routine can cause strain. On the other hand, phasing out work can have social and health benefits and might be easier than you think.

Our semi-retirement guide offers six essential tips to help you work less and live more. You’ll discover how to enjoy more freedom, and maintain a level of financial security.


4. Downsizing

Downsizing is another big issue for retirees – and our research reveals a gender gap here too. Fewer men plan on downsizing in retirement (49% of men said no, versus 39% of women).

While it can be a practical decision to free up cash and move to a more convenient property, it’s also a really emotional decision. You might find that the emotional ties you have on your house are hard to break.

The equity lots hope to release could actually be less than expected once you factor in the financial costs. Stamp duty, redecorating and removals can all add up. It might be more expensive than you first thought.

These considerations are most important if you’re relying on downsizing to boost your retirement income. It’s worth talking it through with your partner and having a back-up plan, just in case things don’t go as expected.

5. Divorce

It might never happen to you, but it’s important to think about what would happen to your retirement income if you ever got divorced. People usually focus on the family home, and don’t think about their pensions. However, in many cases, they can be one of the largest assets built up during the marriage – and often largely in the name of one person alone.

Make sure you do your research if you’re ever faced with divorce. You could receive a portion of your ex-spouse’s pension, particularly if you haven’t had the opportunity to save yourself. There are normally a couple of options available when considering pensions in a divorce settlement and each has advantages and disadvantages. Make sure you take specialist legal or financial advice so you fully understand your options.

* Source: HL Survey October 2020 conducted by Opinium

It’s time to talk

Talking about your savings and investments with your partner is so important – however dull it might seem. In our updated guide, we discuss the ways you could approach talking about your finances and the conversations you should be having.


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    Important notes

    This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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