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MoneyWeek story - How couples can boost their retirement income

Journalist: Marc Shoffman, Freelance

ended 12. July 2024

I am writing a piece for MoneyWeek this afternoon looking at how married couples can use the tax system to their advantage to boost their retirement income.

I am keen on views about whether couples know enough about the importance of joint financial planning. e.g. a higher earner paying into a lower-earning spouse's pension or a stay at home parent claiming child benefit or national insurance credits even if the other partner is a high earner.

Are there other ways married couples or civil partners can work together to boost their retirement income?

Kind regards

Marc

3 responses from the Newspage community

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Editor
Scott Gallacher
Director at Rowley Turton
It is still common for finances to be skewed in favour of the higher-earning spouse. While this can make sense in terms of higher-rate tax relief for that spouse, it is important not to overlook tax planning opportunities by holding assets in the name of a non-working or lower-earning spouse. For example, many husbands have significant savings and are subject to higher-rate income tax on the interest, while their wives have not utilised their ISA allowances. By holding these savings in the wife's name, even without using ISAs, the interest could be received tax-free, utilising her personal allowance.

It is also important not to ignore your income position in retirement. Not funding the non-working spouse's pensions could result in them not fully utilising their personal allowance in retirement, especially if they do not qualify for a full state pension. However, potential divorce should be considered when moving assets between spouses.
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Simon Bridgland
Director at Charwin Private Clients
An often-overlooked way of receiving an income is from an incremental release of equity from the main residence. This would be taken in the form of a lifetime mortgage. The money released is tax free, as it is not treated as a taxable or earned income, it is simply a capital withdrawal. This can also help those with a potential IHT issue, as any debts would be deducted from their estates value on death, reducing the estate value for inheritance tax purposes. This benefit can continue after the first death in the case of joint owners of the home. There are limits which can be withdrawn and these are dependant on the age of the borrower and the lender being used.
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Lisa Tipton
Director of Financial Planning at New World Financial Group
In my experience, many people fail to take into account the advantages of planning for the future together. From a tax perspective, some key advantages can be claiming the marriage allowance to increase your personal allowance if one spouse is a basic-rate taxpayer and one earns below £12,570. Another is making pension contributions of up to £3,600 each year for spouses that don’t work. People should also consider structuring savings so that the lower earning spouse can benefit from savings allowances on the interest received. Structuring retirement income in a tax-efficient manner, using both spouses' personal allowances and making withdrawals as a mixture of tax-free cash and taxable income, can also be extremely tax-efficient. Lastly, filling National Insurance gaps with voluntary contributions if one spouse doesn’t have a full entitlement to the State Pension can help.