In­vest­ment and pen­sion plan­ning when you re­marry

Prepa­ra­tion is even more cru­cial the sec­ond time around

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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’

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