A worrying 54% of UK couples have not carried out joint retirement planning to make sure that, if one of them dies, the other will continue to receive income, reveals recent research carried out on behalf of Prudential.
The figure is not surprising in light of earlier research by the insurer showing that 14% of couples over the age of 40 have never actually discussed their finances at all.
Joint retirement planning
The research assessed 2,002 couples over the age of 40, and found that:
- one in four (26%) couples have not discussed what will happen to their pensions if one partner dies before the other.
- making a will is the only financial planning activity that 13% of those surveyed have done together.
- 7% of those interviewed admit that they will be completely dependent on their partner’s income in retirement.
- Women are twice as likely as men to be dependent on their partner in retirement, with 10% planning to depend on their other half, compared with 5% of men.
Confusion over financial planning
The research reveals significant confusion among couples when it comes to financial planning, with over one sixth (17%) of respondents admitting to not even knowing what their main source of income will be in retirement.
Almost two thirds (65%) said they would rely on their own pension savings, while one in ten people (11%) would look to sources other than pensions for their retirement income.
Overall, a worrying 75% of those polled claimed they had no idea what their income will be in retirement.
Impact of State pension reform
This confusion will only have been exacerbated by the recently proposed state pension reforms.
The proposed reforms, which will take effect from 2017, will create a simple flat rate pension set above the means test (currently £142.70) and based on 35 years of National Insurance contributions.
The proposal has been broadly welcomed, but will take time to bed in.
Other retirement decisions
Finances aren’t the only uncertainty that couples will face in the run-up to retirement, says the Prudential.
Twelve percent of couples claim they haven’t even discussed where they plan to live when they retire. The majority (79%) have done so, with just over half (51%) intending to remain where they are. A further 9% plan to split their retirement between the UK and overseas, while 6% plan to relocate abroad permanently.
“If you’re planning to retire abroad, it is important to check if this has any implications for your State Pension,” said Vince Smith-Hughes, retirement expert at Prudential. “For British expats, in many countries the state pension won’t increase annually in line with CPI, as it does if you live in the UK, meaning that over time its value will fall. It therefore pays to plan all aspects of your finances carefully before relocating.”