Five secrets to saving for retirement as a couple

The upside of retirement planning for couples is that it’s undoubtedly cheaper – there will be only one home to run and you can split the cost of getting around.

According to number-crunching from the Pension and Lifetime Savings Association (PLSA), couples that live together can expect a “moderate” standard of income with a combined income of £43,100, compared to £31,300 for singles.

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The downside is that retirement planning is a whole lot more complicated when there are two people, with different assets, not to mention different expectations and priorities to take into account.

The key is to start talking about your retirement – including your retirement finances – together as soon as possible. With the right planning you can make sure that you are structuring your combined finances in the most tax-effective way and you’ll increase the chances of you both being able to achieve the lifestyles you want.

There’s a lot to consider, but here are some talking points to get you started.

1) Think about your timelines

To plan your retirement finances effectively it’s important to know when it’s likely to start. This means thinking about when and how you plan to retire. Will you transition from full-time work to retirement overnight, or would you prefer to scale back gradually? Do you want to finish working as soon as you possibly can, or can you not quite imagine a life without any work?

Most defined contribution (DC) pensions can be accessed as soon as you turn 55 (57 from 2028), but if you have any defined benefit (DB) pensions check when you will be eligible. Also check what age you will be able to start claiming your state pension. The state pension age is currently 66 for both men and women but is scheduled to increase from 2026.

If one of you plans to retire significantly earlier (or later) than the other, or there’s a big age gap between you, that will have an impact on how you structure your income.

2) Maximise your pension contributions…

As retirement inches closer it’s important that you pay as much as you can afford into your pensions.

Depending on your circumstances, increasing pension contributions and reducing your “net income” can be a particularly tax-effective play, enabling higher earners to claw back some of their personal allowance (it’s gradually tapered away once your net income exceeds £100,000). If you still have children in school, it may help you keep more of your child benefit (which starts being clawed back through the high-income child benefit charge once one parent’s income exceeds £60,000 a year).

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For some couples there might be a fiscal argument for prioritising one partner’s pension over the other; some workplace schemes are more generous than others, for example, where employers are prepared to match increased employee contributions. If one of you pays higher-rate tax and the other basic, there might be logic in pumping the higher earner’s scheme to maximise pension tax relief. But while this might make mathematical sense, you never know what the future holds – it’s vital you both have retirement savings in your own names.

3) …but be mindful of paying too much into one partner’s pension

When you both have decent-sized pensions, it’s also easier to plan your combined income tax effectively. If you’re relying on one partner’s pension to cover all your spending, there’s a greater risk you’ll end up paying higher-rate tax on that income. It’s much easier to stay within the basic-rate tax bracket if money is coming from two individuals.

If one of you has minimal savings – perhaps because they have taken time out to raise a family – the higher earner could make contributions on their behalf. Non-taxpayers can still get tax relief on contributions up to £2,880 a year, which will be boosted to £3,600 after basic-rate tax relief has been applied.

Or, if one partner has maxed out their pension allowance (currently 100% of earnings up to £60,000 a year) or triggered the lower money purchase annual allowance (MPAA) (£10,000 a year) by taking flexible and taxable income from their pension, they could continue to save by helping their partner top up their pot.

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If either of you has a particularly impressive retirement pot, note that even though the lifetime allowance has been scrapped, the amount of tax-free cash that be taken from it is capped. In most cases this will be at £268,275 (25% of the previous LTA, which was £1,073,100).

4) Think about where your income will come from

Your income doesn’t just have to come from your pensions and it’s important that you both review what other savings and investments you have.

As pension income is taxable and any remaining pension funds are sheltered from inheritance tax (IHT) after you have died, it may make sense to consider spending other assets first, such as individual savings accounts (ISA) where all withdrawals are tax-free.

Alternatively, you can use ISAs in combination with pensions to increase your income without increasing your tax bill.

When it comes to your pensions, it’s also important to give thought to how you turn your pot into income. Although flexi-access drawdown cannot deliver a guaranteed income, it does give you total control over how much income you take out of your pension and when.

This flexibility can be particularly helpful when you are planning a household’s income where this a big age gap and only one partner has retired, or where couples are of a similar age but retiring at different paces. The income that needs to be taken out of a pension can be adjusted as earnings patterns change or other retirement pots come into play.

5) Prepare for the inevitable

When you think about retirement planning your focus will naturally be on how you will spend your time and the lifestyle you want to lead. But while retirement should undoubtedly be an enjoyable phase of life, couples also need to prepare for the fact that, unless there’s a tragic accident, one partner will die before the other.

This means a key part of retirement planning for couples is ensuring that, whichever person dies first, the surviving partner won’t be left unable to pay the bills. This is easier to manage if you’ve moved into income drawdown because your remaining funds can be passed on to your spouse.

It’s much harder to pass on wealth if you have used your pension to buy guaranteed income with an annuity. Payments normally stop when the policyholder dies, unless a joint policy was taken out, or payments were guaranteed for a specified period.

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Even though it’s easy to pass on pension wealth to your partner (whether you are married or not), it’s important your pension provider knows who to pay the money to. You can do this by completing an expression of wishes form. It may be that you completed one years ago but if your circumstances have changed – say you got divorced and are now in a new relationship – it’s important your instructions are up to date.

You should also ensure you have a properly written and up-to-date will – this is especially important for unmarried couples, who wouldn’t otherwise have any legal claim on their partner’s estate.

It’s also essential if you are in a second marriage and want to provide for both your spouse and children from a previous relationship after you have died.

In both these cases it would be sensible to get legal advice, rather than attempting a DIY will.