Investment and pension planning when you remarry
Preparation is even more crucial the second time around
If you’re embarking on a second or subsequent marriage there are lots of important financial considerations to think about.
You’ve probably built up more assets and you might have children from previous relationships, making your circumstances more complicated than they were the first time around.
WHERE DO I START?
A good starting point is to discuss your existing investments, pensions, income and property. You should also explain to your partner any ongoing financial commitments from previous relationships, such as child maintenance.
Once everything is laid out on the table you can decide how to move forward with your money. Try to estimate what your dayto-day income and expenditure is likely to be and then agree on who will pay for what.
It’s important to discuss your long-term financial goals, such as saving for your children’s university fees and planning for retirement. This will influence how you invest as a couple.
SHOULD WE COMBINE OUR INVESTMENT ASSETS?
Deciding whether to manage your investments separately or amalgamate them can be difficult.
It will depend on factors such as whether the value of your assets is evenly split or not and your wider family circumstances.
Keeping assets separate will usually be the better option if there is a big age gap between you. In general, the level of risk someone can afford to take decreases as they get older and their investment time horizon shortens.
‘Time horizon is one of the crucial determinants of an appropriate investment strategy and so this becomes very relevant if there is a big age gap between the couple,’ says Charlie Musson, spokesperson for AJ Bell Youinvest.
‘If one person has a time horizon of 20 years and the other plans to access their money in two years, this is likely to have a significant impact on the way the money is invested.
‘As a result, where there is a significant age gap couples might decide to look at their investments separately so they
can adopt strategies to suit the differing needs of both parties.’
HOW DOES REMARRYING AFFECT MY PENSION?
Pension planning can become very complicated when there is more than one spouse and family to consider.
Fiona Tait, technical director at Intelligent Pensions, says if you have been divorced you might have given up some of your pension benefits to your ex-spouse as part of the financial settlement.
It’s important to review your remaining pension and do what you can to replace the lost benefits. You should also ensure your pensions are working efficiently.
‘All of your financial assets, including pensions relating to previous employments, should have been assessed during the divorce process. Now may be a good time to consider whether you need to consolidate some or all of them within a single plan and whether your investment choices need to be reviewed,’ says Tait.
If you have a final salary scheme, check whether your new spouse is eligible to receive spouse’s benefits. The trustees of some schemes reduce the value or even disqualify a spouse from receiving death benefits for very recent marriages.
If your pensions are already in payment, analyse whether the decisions made are still appropriate to ensure you both have sustainable income to last for the rest of your lives.
Make sure you update your death benefit nomination form with the name of your new spouse. You can also choose whether you want your pension to go to your natural children or to both natural and step (or adopted) children.
PLANNING FOR THE WORST
If you’ve been through a divorce before, you’ll know how stressful the process is, particularly when it comes to sorting out finances and assets. Ensure you do all you can to avoid this stress a second time around.
Patrick Connolly, head of communications at Chase de Vere, suggests agreeing at the outset what will happen to your pensions, investments and property in the future and how your finances will be structured.
You might want to consider a pre-nuptial agreement setting out what you’d like to happen if the marriage breaks down. The agreements aren’t legally binding but they are seen as influential by the courts.
It is vital to get a new will, particularly if you have children from a previous relationship. When you remarry, any existing will you have becomes null and void.
Alex Brown, wealth management director at Mattioli Woods, says ensuring assets go to the right person on death is one of the biggest concerns among couples who have children and then remarry.
‘The natural concern is that leaving total assets to the surviving spouse could see their children subsequently cut out of future inheritance, but equally they don’t want to see their surviving spouse struggle due to half the wealth being directed straight to the children instead,’ says Brown.
One option is to place your inheritance in a trust. Trusts can be structured to distribute money to your spouse and children in the amounts you specify; ensuring everyone you care about is treated fairly.
DON’T FORGET TAX AND INSURANCE
When you remarry it’s worth reviewing your tax arrangements. You might be able to make use of the tax allowances given to married couples and move assets from one person to the other to reduce your tax bill.
It’s also important to ensure policies like life insurance are updated to show your new partner as the beneficiary.
ENSURING ASSETS GO TO THE RIGHT PERSON ON DEATH IS ONE OF THE BIGGEST CONCERNS AMONG COUPLES WHO HAVE CHILDREN AND THEN REMARRY’