Why financial planning as a couple matters

Valentine’s Day is an opportunity to celebrate relationships and while it’s good to focus on love, it’s equally important to discuss money too. Talking about money isn’t something couples like to discuss often or find easy. 

Research shows that less than a quarter of couples feel comfortable talking about their finances. One simple reason is that it’s often a challenging subject to address. Lack of effective communication skills or embarrassment can make it even harder to navigate these conversations. 

Differences in financial habits and priorities can create further problems. One person may want to save money for a rainy day, while the other may want to spend money on a luxury holiday. 

While talking about your finances may not be the most romantic thing you can do, it can play a crucial role in building a strong and secure future together and even enhance your relationship. 

Benefits of financial planning as a couple

Collaborating on financial planning together can be hugely advantageous. You can benefit through: 

• Shared goals: Talking about money together can ensure you are on the same page when it comes to retirement plans, savings and who pays for what. Arguments between couples are often about money, but if you talk about it regularly, budget and create a financial plan that you can agree on, this can reduce the conflict.

• Collaboration, which leads to more success: A report by PensionsAge revealed that couples who plan together have better retirement prospects. It highlighted that almost half (49%) of couples who worked together on their retirement plan could earn a moderate income, but this fell to 40% for those who didn’t collaborate and 41% if one person dictated all the financial decisions.

• Maximising tax efficiencies together: To maximise tax efficiency, couples can each invest £20,000 in an Individual Savings Account (ISA) for a total of £40,000 tax-free. For 2024/2025, ISAs offer tax-free growth and income. Additionally, the Capital Gains Tax (CGT) allowance is £3,000, down from £6,000 last year, but couples can transfer assets between each other to maximise their allowances. Basic rate taxpayers can earn up to £1,000 tax-free through the Personal Savings Allowance (PSA), while higher rate taxpayers can earn up to £500 from interest on savings and bonds. With these types of allowances, it makes sense for the lower-earning partner to save more of the cash as they typically get bigger tax allowances. 

• Planning for the unexpected: Couples have the advantage over single people in that they can pool their money to save more quickly and tax efficiently. But becoming reliant on each other’s income without a back up plan should something happen (like death) could leave you in a very vulnerable position. Make sure the surviving partner has enough money to live on and knows where the will and insurance details are kept and what to do in the event of an emergency. 

Discuss retirement plans early

For some couples, retirement may be a distant event and there could even be other pressing priorities, such as saving towards a deposit for a dream home, for example, to focus on. However, the best time to talk about and plan for the golden years is right now. 

The sooner you begin contributing to your pensions, the more these will benefit from compound interest. 

A general rule of thumb is that you should save around 15% of your annual income into your pension from an early age. If you haven’t started pension contributions, you may need to pay a higher amount to catch up. Talking about future security in retirement now can also help you to identify any pension shortfalls and top them up. 

If you are both working, consider all your workplace pensions when planning for retirement and optimise contributions and tax benefits. It’s important to verify what death benefits your pension schemes may offer and ensure that these will be adequate to help the surviving partner to cope financially. 

Simple steps to create future wealth 

To create a successful, long-serving financial goals, it’s important to: 

• Have an honest conversation regularly. Talk about savings, earnings and any debt you may have accumulated. 
• Set clear, achievable goals together. Saying you want to be “well off in retirement”, is vague. How will this be achieved? It’s important to calculate how much you’ll need to live on to cover all expenses. 

Taking these steps and talking about money can help to secure your financial future. If you haven’t yet invested in a pension or if there’s a shortfall, talk to us today. At Moneyfarm, you can get an expertly managed pension portfolio, matched to your risk profile and financial situation. 

If crafting a financial plan with your partner is too overwhelming or if you have questions about the way you have structured your finances, you can chat to a member of our friendly team who can help to ensure you’re on the right track.