When two becomes wan
LOVE and money can make a tricky combination and couples often choose to keep the two things separate as a result.
Many continue to prize their financial independence, even after getting married or committing to a long-term relationship.
Just one in 10 married couples over 50 share all their money with their partner in a joint current account.
Two in three operate a joint account but put less than half of their money in there, while one in five do not have one at all, according to new research from Saga Personal Finance.
Managing director Jeff Bromage said that setting up a joint account is a significant moment in a relationship: “It is important to talk openly about who is managing that money.”
Joint savings accounts make it easier to manage responsibilities such as servicing a mortgage and paying household bills, but they must be handled carefully.
If the account goes overdrawn, each account holder is responsible for the money owing. If a partner withdraws cash without the other’s permission, they have few ways of getting it back.
Account holders will be co-scored by credit agencies so be wary if your partner has a poor credit record.Ask Experian or Equifax to remove their name from your report if you break up.
Insurer AIG Life chief financial officer Donald MacLean said even the most independent couples can quickly become financially reliant if one partner falls ill or loses their job.
Every year, one million people are unable to work due to prolonged sickness or injury, according to the Association of British Insurers. “Sudden loss or drop of income can create an enormous burden on partners and it is important to have a financial safety net,” MacLean said.
An insurance policy called income protection will pay a replacement income if one of you cannot work for long periods: “It can pay a monthly benefit if a spouse or partner has to give up work to care for the other.”
Policies are issued by insurers such as Aegon, AIG, Aviva, Legal & General, LV= and Vitality, and mostly sold through intermediaries.
Another danger is that one partner becomes over-reliant on their spouse’s pension because they have not built up sufficient retirement savings.
Just over a quarter of over-50s will be dependent on a partner’s pension, according to SunLife, and that figure rises to 30 per cent for women.
Insurer Aegon’s head of pensions Kate Smith said women should save more: “Those with access to a workplace pension must not opt out, and instead aim to maximise their employer contributions.”
The self-employed need to set up a personal pension and women who have taken maternity leave or time out as a carer should try to make up the pension shortfall, Smith added.
Partners can help a non-working spouse or partner by investing £3,600 a year in a personal pension on their behalf.They can claim 20 per cent tax relief on contributions, reducing the cost to £2,880.
FINANCES: Keep control