The upside of retirement planning for couples is that it’s very economical – in most cases there will be only one home to run and you can often split the cost of getting around. In fact, figures from the Pension and Lifetime Savings Association (PLSA), show that couples that live together can expect a ‘moderate’ standard of income with a combined income of £43,100, compared to £31,300 for singles.

There is a downside though – 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 joint retirement – and your retirement finances – as soon as possible. With the right planning you can make sure that you’re structuring your combined finances in the most tax-effective way and you’ll increase the chances of you both achieving the lifestyles you want in retirement. There’s a lot to consider, but here are some talking points to get you started.

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 one or both of you want to finish working as soon as you possibly can, or can you not quite imagine a life without any work?

These are important questions that need answered so you can begin planning around your individual and combined goals.

Most defined contribution pensions can be accessed as soon as you turn 55 (57 from 2028), but if you have any defined benefit pensions check when you’ll be eligible. Also check what age you’ll 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 to 67 between 2026 and 2028.

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.

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 particularly tax-effective, 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 also help you keep more of your child benefit – this starts being clawed back through the high-income child benefit charge once one parent’s income exceeds £60,000 a year.

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

Be aware 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 and you’ll have two personal allowances available to use as well.

If one of you has minimal savings – perhaps because you have taken time out to raise a family – your higher earning partner could make contributions on your 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 of you has maxed out your pension allowance – currently 100% of earnings up to £60,000 a year – or triggered the lower money purchase annual allowance (£10,000 a year) by taking flexible income from a pension, you could continue to save by helping your partner top up their pot.

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

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 normally sheltered from inheritance tax (IHT) after your death, it may make sense to consider spending other assets from inside your estate 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 flexible drawdown can’t provide 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 there is 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.

Prepare for the inevitable

When you think about retirement planning your focus will naturally be on how you’ll spend your time and the lifestyle you want to lead. But 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, 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’ve used your pension to buy guaranteed income with an annuity. That’s because payments normally stop when the policyholder dies, unless a joint policy was taken out, or payments were guaranteed for a specified period.

Keep wills and pension nominations up to date

Thinking ahead to a time when you’re no longer around may not be a pleasant thought. But it’s important to make sure that everything is set up so your money goes to who you want it to on your death.

Even though it’s easy to pass on pension wealth to your partner – whether you’re married or not – it’s important your pension provider knows who you would like them to pay the money to. You can do this by completing an expression of wishes form.

It's so important that your will and any beneficiaries you have listed for your pensions and any life assurance policies are up-to-date. Bear in mind that if you aren’t married to your partner and don’t have a will, your estate would usually go to your family rather than to them.

It’s also important to understand that marriage usually revokes any previous wills. So, if you marry or remarry, make sure you update your will. It’s also essential if you’re in a second marriage and want to provide for both your current spouse and children from a previous relationship after you have passed. In these cases, it would be sensible to get legal advice, rather than attempting a DIY will.

Prepare to pass on your wealth tax-efficiently

There are also a few things you can do to make sure you’re on track to leave as much as you can to your partner and other loved ones rather than to HM Revenue and Customs.

Understanding what inheritance tax is, what allowances are available and if your estate could be liable is key. You’ll also have to think about giving gifts while you’re still alive or using trusts to pass on gifts so it’s essential to plan ahead.

You can find out more about in our article Five ways to take control of inheritance tax. You can also watch our video on how to pass on money from things like pensions and life insurance policies to the people you want, in the right way.

Don’t forget about insurance

The importance of having proper insurance coverage in the event that misfortune strikes can never be underestimated. Watch our video to find out what you need to know about income protection, critical illness cover and life insurance.

With a bit of careful thought and forward planning, there’s a lot you can do now to make sure that your partner and other loved ones will be taken care of financially.

Think about getting advice

Careful planning is important to help look after your and your partner’s wealth in retirement, and to make sure that you and your loved ones get the maximum benefit from that wealth both in your lifetime and beyond.

If you have any questions about financial planning as a couple, getting professional financial advice can give you peace of mind. A financial adviser will go through all the options available and work with you on a tailored plan to suit you both. Find out how our financial planning and advice services could help you and your partner plan the future you want together.

This content is based on an article by Rachel Lacey for ii.

The information in this article should not be regarded as financial advice. Please remember that the value of investments can go down as well as up and may be worth less than was paid in. Information is based on abrdn’s understanding in October 2024.

abrdn Financial Planning and Advice Ltd is registered in England (01447544) at 280 Bishopsgate, London EC2M 4AG and authorised and regulated by the Financial Conduct Authority.