Two become one in pension planning

Two Become One In Pension Planning 


Too often, when it comes to retirement planning, one spouse tends to get forgotten if he or she hasn't been the main earner. 

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We believe this is a mistake and your partner should always form a key part of your retirement plan. There are two main reasons for this. 

One is that the other partner may have quietly built up pension assets without realising it, which could make a significant contribution to retirement income for a couple. 

The second is, two people can have a joint income of £23,000 a year tax free, using both personal income tax allowances, whereas for a single man or woman to receive £23,000 net, they would need an income before tax of £27,030, which means running the pension pot down much faster. 

The case of Ann & Darren - This couple had never imagined that they would be able to retire early until they came to see us. They knew they had acquired various assets and pension entitlements, but it was only after we looked into it that it was realised they'd accumulated between £500,000 and £600,000 between them in defined benefit and money purchase schemes. We explained how this could be used in the most tax efficient manner and they have now been able to retire early. This has changed their lives and underlines the importance of seeking advice and of regularly reviewing pension and planning.

Then there was the case of James and Lisa Bell. We'd been advising him for years and whenever we asked about Lisa's pension assets James was dismissive, saying, 'Oh, she hasn't got much'.

But as retirement age drew nearer, we pressed him and when we looked into it, we found that Lisa, who had done a number of not particularly well paid jobs over the years, had, in fact, accumulated about £90,000 in five different pensions. This is a significant sum, potentially bringing the Bells an extra £10,000 a year, tax free for ten years, which they didn't expect to be receiving.

This by no means is an unusual case. Often a partner will work part time or in undemanding jobs to ear pin money or to supplement family income while bearing much of the burden of childcare. But these roles may well have been for employers - such as the State - which provides generous pension benefits. 

Now James sees the value of his wife's pension savings and of her tax free personal income tax allowance, he is paying contributions into her pension pot through his own private limited company, of which she's a director. As he has a much bigger pension pot than she does, it makes sense to pay into hers so that when they come to draw on the funds, they can do so equally, taking full advantage of both personal allowances for longer. Trying to even up the pension savings should form a part of retirement planning for couples. 

For a couple, even in retirement, teamwork's important.


It is important that no actions should be taken without first taking advice. Personal circumstances and an individual's appetite for risk means that the advice for one person may not be the same for everyone. The information in this blog or any response to comments should not be regarded as financial advice. Reeves do not advise on Defined Benefit pension schemes. Reeves do introduce a third party specialists in areas of work we do not cover. Please note: This article has been published with the use of a fictional character to outline a case study. 

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About the Author

By Nigel Reeves: My mission is to provide the quality, honest & jargon-free pension advice that people need to secure the retirement they deserve. At home, I'm a family man and an active supporter of grassroots sports!

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