Build a retirement plan for two
You and your partner may well already have joint bank accounts and a joint mortgage. But the chances are you’ll have separate pensions, and perhaps other savings and investments held in your own names too.
However, when it comes to planning your retirement, using your combined savings and investment pots could lead to a higher and more comfortable retirement income in the years ahead. Plus, you may be able to make your future income more tax efficient.
There’s a huge amount to think about when planning for retirement as a couple, and some of the decisions you need to take in the planning stage are irreversible and could affect your lifestyle for years to come. This is where expert retirement planning advice can really come into its own and help take the pressure off. Having a plan in place that’s tailored to you and your partner could help you feel much more prepared and confident about your retirement life.
Make the most of each other’s tax allowances
Pensions and ISAs
Both pensions and ISAs (individual savings accounts) are tax-efficient ways to save and invest money. And if you’re married or in a civil partnership, you may be able to benefit from using each other’s allowances.
The standard pension annual allowance – the total that you, your employer or a third party can pay in across all your pension plans in a single tax year – is £40,000. So if you’ve reached your limit, but your partner hasn’t, you could make pension contributions on their behalf. And with the annual ISA allowance currently £20,000, together you could save and invest up to £40,000 tax efficiently each year.
Capital gains tax
Capital gains tax (CGT) is another area where you could benefit by teaming up with your partner if you’re married or in a civil partnership - particularly with the annual exempt amount being cut from £12,300 to £6,000 in April 2023 and then again to £3,000 in April 2024.
Investments held in pensions and ISAs aren’t liable to CGT when you take money out. But if you sell or give away any other investments or assets, any gains you make above the exempt amount will be taxed at 20% if you’re a higher rate taxpayer, or 10% if you’re a basic rate taxpayer and your gains don’t push you into the higher rate bracket. Gains on property which isn’t your main home are taxed even more heavily – 28% for higher rate taxpayers and 18% for basic rate taxpayers.
So if one of you has an unused CGT allowance, you can transfer assets between each other, potentially doubling the amount of gains you can make before paying tax. You could also think about transferring assets to a spouse or civil partner if you’re a higher rate taxpayer facing a CGT bill and they pay a lower rate of tax.
Keep wills and beneficiaries up to date
Thinking ahead to a time when you’re no longer around may not be a pleasant thought. But it’s important to make sure that everything is set up so your money goes to who you want it to on your death.
That means making sure your will and any beneficiaries you have listed for your pensions and any life assurance policies are up to date. Bear in mind that if you aren’t married to your partner and don’t have a will, your estate would go to your family rather than to them. It’s also important to understand that marriage usually revokes any previous wills. So if you marry or remarry, make sure you update your will.
Prepare to pass on your wealth tax efficiently
There are also a few things you can do to make sure you’re on track to leave as much as you can to your partner and other loved ones rather than to HM Revenue and Customs:
- Understand what inheritance tax is and if your estate could be liable
- Think about giving gifts while you’re still alive
- Think about using trusts to pass on gifts
- Be aware who will have to pay inheritance tax on your estate
- Plan ahead
Find out more about all of these in our article Five ways to take control of inheritance tax. You can also watch our video on how to pass on money from things like pensions and life insurance policies to the people you want, in the right way.
Don't forget about insurance
The importance of having proper insurance coverage in the event that misfortune strikes can never be underestimated. Watch our video to find out what you need to know about income protection, critical illness cover and life insurance.
With a bit of careful thought and forward planning, there’s a lot you can do now to make sure that your partner and other loved ones will be taken care of financially.
Think about getting advice
Careful planning is important to help look after your and your partner’s wealth now, and to make sure that you and your loved ones get the maximum benefit from that wealth both in your lifetime and beyond.
If you have any questions about financial planning as a couple, getting professional financial advice can give you peace of mind. A financial adviser will go through all the options available and work with you on a tailored plan to suit you both. Find out how our financial planning and advice services could help you and your partner plan the future you want together.
The information in this article should not be regarded as financial advice. Information is based on our understanding in February 2023. Tax rules can always change in the future. Your own circumstances and where you live in the UK could have an impact on tax treatment.
Build a retirement plan for two
You and your partner may well already have joint bank accounts and a joint mortgage. But the chances are you’ll have separate pensions, and perhaps other savings and investments held in your own names too.
However, when it comes to planning your retirement, using your combined savings and investment pots could lead to a higher and more comfortable retirement income in the years ahead. Plus, you may be able to make your future income more tax efficient.
There’s a huge amount to think about when planning for retirement as a couple, and some of the decisions you need to take in the planning stage are irreversible and could affect your lifestyle for years to come. This is where expert retirement planning advice can really come into its own and help take the pressure off. Having a plan in place that’s tailored to you and your partner could help you feel much more prepared and confident about your retirement life.
Make the most of each other’s tax allowances
Pensions and ISAs
Both pensions and ISAs (individual savings accounts) are tax-efficient ways to save and invest money. And if you’re married or in a civil partnership, you may be able to benefit from using each other’s allowances.
The standard pension annual allowance – the total that you, your employer or a third party can pay in across all your pension plans in a single tax year – is £40,000. So if you’ve reached your limit, but your partner hasn’t, you could make pension contributions on their behalf. And with the annual ISA allowance currently £20,000, together you could save and invest up to £40,000 tax efficiently each year.
Capital gains tax
Capital gains tax (CGT) is another area where you could benefit by teaming up with your partner if you’re married or in a civil partnership - particularly with the annual exempt amount being cut from £12,300 to £6,000 in April 2023 and then again to £3,000 in April 2024.
Investments held in pensions and ISAs aren’t liable to CGT when you take money out. But if you sell or give away any other investments or assets, any gains you make above the exempt amount will be taxed at 20% if you’re a higher rate taxpayer, or 10% if you’re a basic rate taxpayer and your gains don’t push you into the higher rate bracket. Gains on property which isn’t your main home are taxed even more heavily – 28% for higher rate taxpayers and 18% for basic rate taxpayers.
So if one of you has an unused CGT allowance, you can transfer assets between each other, potentially doubling the amount of gains you can make before paying tax. You could also think about transferring assets to a spouse or civil partner if you’re a higher rate taxpayer facing a CGT bill and they pay a lower rate of tax.
Keep wills and beneficiaries up to date
Thinking ahead to a time when you’re no longer around may not be a pleasant thought. But it’s important to make sure that everything is set up so your money goes to who you want it to on your death.
That means making sure your will and any beneficiaries you have listed for your pensions and any life assurance policies are up to date. Bear in mind that if you aren’t married to your partner and don’t have a will, your estate would go to your family rather than to them. It’s also important to understand that marriage usually revokes any previous wills. So if you marry or remarry, make sure you update your will.
Prepare to pass on your wealth tax efficiently
There are also a few things you can do to make sure you’re on track to leave as much as you can to your partner and other loved ones rather than to HM Revenue and Customs:
- Understand what inheritance tax is and if your estate could be liable
- Think about giving gifts while you’re still alive
- Think about using trusts to pass on gifts
- Be aware who will have to pay inheritance tax on your estate
- Plan ahead
Find out more about all of these in our article Five ways to take control of inheritance tax. You can also watch our video on how to pass on money from things like pensions and life insurance policies to the people you want, in the right way.
Don't forget about insurance
The importance of having proper insurance coverage in the event that misfortune strikes can never be underestimated. Watch our video to find out what you need to know about income protection, critical illness cover and life insurance.
With a bit of careful thought and forward planning, there’s a lot you can do now to make sure that your partner and other loved ones will be taken care of financially.
Think about getting advice
Careful planning is important to help look after your and your partner’s wealth now, and to make sure that you and your loved ones get the maximum benefit from that wealth both in your lifetime and beyond.
If you have any questions about financial planning as a couple, getting professional financial advice can give you peace of mind. A financial adviser will go through all the options available and work with you on a tailored plan to suit you both. Find out how our financial planning and advice services could help you and your partner plan the future you want together.
The information in this article should not be regarded as financial advice. Information is based on our understanding in February 2023. Tax rules can always change in the future. Your own circumstances and where you live in the UK could have an impact on tax treatment.