Looking to engage more with your household finances? Help could be at hand
If you are married or in a long-term relationship, you and your partner’s finances are likely linked in some way. This might be through a joint bank account or life insurance policies with each other named as beneficiaries.
Planning your finances as a couple makes monetary sense – it can have tax benefits and helps you to work towards shared life goals.
But what if only one of you is in charge of making these big financial decisions? And, more worryingly, what would happen if the financial decisionmaker passed away?
The gender advice gap, and differing life expectancies, mean that women are more likely to survive their partner, while also less likely to be involved in household finances. If this sounds like you, you’re not alone.
One of Logic Financial Services’ own clients is looking to set up a group for women in a similar position, providing financial education and support.
Keep reading to find out more.
Men are more likely to seek financial advice than women
Research figures published by MoneyAge highlight the gender gap in financial advice. While men are most likely to seek help from advice websites (35%) or financial advisers (30%), 42% of women will go to their families first.
The most common reason for seeking advice was “pensions and retirement planning” however the FCA’s Financial Lives survey conducted back in 2020, found a gender gap in pension engagement. Among men, 64% are aware of how much they pay into their pensions, but the figure for women is just 51%.
This is especially worrying thanks to the role of the gender pay gap on women’s pensions.
A recent Scottish Widows Women and Retirement report found that, on average, women in full-time work earn a median wage of £6,100 a year lower than men, meaning a woman with average savings rates over a 44-year career would retire with £100,000 less in her pension pot than a man.
Women are also more likely to lose out on pension entitlement during a divorce.
Making financial decisions together is the best option (if you can)
Engaging with your finances as a couple has several advantages, here are just three of them:
1. You can decide on your financial future together
Royal London research confirms that money is the main cause of arguments between UK couples, with 62% admitting to financial fallings-out.
While 33% of couples believe they are financially incompatible, whether you’re buying a home, choosing a car, or planning your shared retirement, communicating as equals and making joint decisions is key. This way, you’ll know you both agree with the plan and can engage in it from the outset.
2. It is tax-efficient during your and your partner’s lifetime
The Marriage Allowance can be used to lower the amount of tax payable in some circumstances. If your income is below the Personal Allowance (£12,570 for the 2022/23 tax year) and your partner pays basic rate Income Tax, you can transfer up to £1,260 of your Personal Allowance to them. This could reduce your spouse’s tax bill by £252.
You might also consider transferring assets between you and your partner to make Capital Gains Tax (CGT) savings when you sell these assets.
Tax calculations can be complicated so be sure to speak to us before you make any joint decisions to save tax. This will ensure you’re both aware of the options and their consequences.
3. It is tax-efficient on death
The value of your estate above a certain threshold attracts tax at 40%. However, you can pass your whole estate to your spouse or civil partner on death without Inheritance Tax (IHT) being payable, regardless of whether your estate exceeds the threshold.
It is also possible to pass on any unused threshold, effectively doubling the value of the estate that can be held without tax being due.
The nil-rate band currently stands at £325,000 and the residence nil-rate band at £175,000. An estate, including a main residence passed to the next generation, can be worth up to £1 million tax-free.
We can help, but joining a local group of likeminded people could help too
If you have always been slightly removed from your household finances, or you have recently suffered a loss, now is a great time to re-engage and fill any financial knowledge gaps you have.
At Logic Financial Services, we have decades of experience and expertise. But you might also find it’s useful to speak to someone in the same boat as you. Someone like our client, Claudia de Verteuil-Holliday.
In the past, Claudia has taken a backseat where household finances are concerned. But, she has come to realise the difficult position this would leave her in, should something happen to her husband.
She is looking to set up a group for other women (of, or approaching, pensionable age) to share experiences and learn more about money matters.
Would you appreciate more confidence and know-how when it comes to managing your money and financial affairs? Do you want to learn more? Would you be interested in joining a meeting in Watlington?
If so, you can get in touch with Claudia at firstname.lastname@example.org to confirm your interest.
Get in touch
In the meantime, remember that we are here too.
Please email us at email@example.com or check with your adviser if you have any questions about your retirement or the benefits of financial planning as a couple.