“What is mine is yours and what is yours is mine” is ingrained in our collective consciousness about marriage, thanks to William Shakespeare. But, after 20 years of marital bliss, my husband and I still haven’t merged our finances, aside from the mortgage.
We have moved along quite well, keeping our banking, savings and investment activities separate.
It’s a pleasure to know that this is common. Malvee Vaja, advisor at Rathbones Financial Planning, says: “Increasingly, as more women take on senior, better-paid roles, we are seeing clients keep their finances separate; whether married or not.”
However, I have sometimes wondered if our reluctance to have a joint bank account is a reflection of the quality of our relationship.
In practice, we would both have full supervision of the family budgets. However, a joint account can lead to arguments over expenses (clothes for me, gadgets for him).
Sarah Coles, head of personal finance at Hargreaves Lansdown, says: “It can work well for couples where one earns most of the income and the other doesn’t want to have to ask for every penny they spend.”
It comforts me to know that from time to time we have set aside separate savings accounts for a joint project, without unnecessary complications.
Counselors encourage couples to take a “holistic” approach to planning. But could the adoption of joint financial policies cause more problems than they solve?
Unless you share the same approach to money and trust each other implicitly, joint accounts can result in some unwanted surprises. A partner could spend more than agreed and even accumulate joint debts.
However, some tax rules favor separate accounts. Taxable investment accounts, called general investment accounts, can be set up together, saving transaction and platform costs. But if you are rich enough to contribute to these accounts above your annual Isa and pension allowances, advisers say it may be wiser to have single accounts. This can be beneficial when it comes to estate tax planning, where money is left in certain types of trust for your spouse in the event of your death. If you have a joint GIA, this would not be an option.
Advisers also warn against purchasing joint life and critical illness insurance, where reduced costs do not necessarily equal “value.” Some are even calling for the protection sector to phase out pooled coverage.
Joint life insurance can pay out on the first death, leaving the survivor without coverage, or on the second death, with no payout in the case of the first, which is why it tends to be used largely to cover the tax. to the inheritance.
Two single policies would be profitable in both cases. For example, parents with single critical illness policies can get two payments for a child who is rushed to hospital with a serious condition.
Alan Lakey, director of comparison website CIExpert.essays: “If you look at the gender-specific claims statistics, the majority of female claims are for cancer and very few are for heart attacks. With men it is the other way around.” Your preference is to find the best coverage for the illnesses that each spouse is most likely to suffer from.
Single policies make sense for the future, he adds, noting that more than half of marriages end in divorce. They are also a good protection against marital financial abuse. Coles says: “There was a notable case where someone had suffered an illness and was owed payment, but as both partners needed to accept the payment, the estranged partner refused it.”
The cost-cutting argument for joint policies ultimately depends on the age and health of the two people and the level of coverage. But it should not be a key factor in making a decision, since the cost difference is usually minimal. Lakey says: “It could be two individual plans for £50 a month each or a bundled plan for £96.”
Like many couples, my husband has his pensions and Isas, I have mine and we have a rough idea of what combined income we expect in retirement.
While all couples have to follow tax rules, tax planning leaves them with room for choice and sometimes big savings, if they are willing to transfer money between them.
Opportunities would knock harder if one of us wasn’t working. The earner could potentially fill out an additional Isa allowance, a zero-rated capital gains tax allowance and a pension allowance.
Current rules allow up to £2,880 a year to be paid into the pension of a person with no income. The tax relief brings the amount to £3,600. But research from Nucleus, the advisor platform group, found that 76 per cent of people don’t know this.
Maximizing two pensions to get two tax-free lump sums also looks increasingly valuable. Speculation over upcoming budget changes has included the possibility of Chancellor Rachel Reeves reducing the maximum tax-free amount from £268,275 to £100,000.
On the other hand, couples where both earners may want to prioritize the pension of the higher earner, to obtain a greater reduction in income tax on contributions. But Gary Smith, financial planning partner at Evelyn Partners, warns that pensions can be included in a financial assessment for long-term care fees. “The long-term care assessment is made on an individual’s assets and income. Therefore, if the assets are predominantly in the name of one person, the other is potentially vulnerable.”
Therefore, it is not always advisable to inject romance through shared tax planning. But there could still be some limited romance with joint policies in the future.
Independent annuity expert William Burrows says: “When people first retire, they want reduction. As they grow they want a guaranteed income. I know many men who say ‘when I’m gone I want to leave my affairs in order and my wife in the same situation.’ “Usually that means an annuity.”
A single annuity generally pays a higher annual pension than a joint life product, because the income will cease upon the death of the policyholder. If you both have decent pensions, two individual annuities will give you more from day one.
With a joint annuity, the income will continue for the second person for the rest of their life. Income may continue for the full amount or be reduced by two-thirds or 50 percent.
And here comes the potential “romance.” Burrows says some people may start out wanting a single annuity, only to switch to a joint product when they realize the income reduction is not as great as they first thought.
A 65-year-old who buys a £100,000 annuity can get £7,100 gross a year for a single annuity with level payments (which do not increase over the life of the policy). This will be reduced to £6,635 for joint living with a 50 per cent continuation of income after the first death, where the couple is three years younger, says Burrows.
Sacrificing a few hundred pounds a year to leave our partner half of our income to enjoy after we die? I guess my husband and I will have to figure out how romantic we feel in another 20 years.
Moira O’Neill is a freelance money and investing writer. Email: moira.o’neill@ft.comX: @MoiraONeill,Instagram @MoiraOnMoney