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Couples fail to plan – and could pay the price

Couples fail to plan – and could pay the price

Category: Retirement

Updated: 14/10/2014
First Published: 14/10/2014

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Do you discuss your finances with your other half? It may not always be a comfortable conversation, particularly if you're looking a long way into the future, but these conversations could be vital to ensure your financial stability for the long term. However, it's even more important that you're able to turn those conversations into action, and research from Prudential has revealed that this is the area where most couples fail to follow through.

The study found that the majority of UK couples aged 40+ were happy to talk about their money, with 79% having discussed their finances in the last year. However, over half admitted that these conversations didn't result in a concrete plan for the future, with 52% failing to agree on a target income for their joint retirement incomes. This figure rises to 67% for couples aged 45 to 54, the crucial years in the lead-up to retirement.

The figures also revealed that, despite that fact that 61% of couples over 40 have discussed retirement panning, 18% are still not certain of where their main source of retirement income will come from, while 25% have retirement funds that will only provide an income for one individual – not for both parties.

What's the problem?

The problem with couples failing to develop concrete plans is that their future security could be put in jeopardy. The fact that so few know how they're going to secure a retirement income – and that a quarter only have enough funds to provide an income for one half of the couple – suggests that many won't be suitably prepared for their golden years.

To those who are years away from retirement it may not sound like too much of a concern, but unfortunately, they could well pay the price in the long run. It takes a lot of forward planning to ensure you've got a suitable retirement income, and given that retirement can last in excess of 20 years, that's a lot of income you need to organise.

That's why saving as much as possible from as early as possible is so important, but so, too, is finding the right retirement solution. The pensions landscape has had a serious shake up in the last few months with retirees having more choice than ever in how they can spend their pension pot, but that means it's even more important to be prepared.

Prudential's research found that 74% of couples over the age of 40 were aware of the changes, and 29% had already discussed the implications with their partners. However, despite this apparent awareness of the choices and opportunities now available, only 20% said that they'd consulted a financial adviser in the last five years, while just 9% have had a joint meeting with their spouse and a retirement specialist.

The vast majority – 70% – of couples surveyed have never seen a financial adviser to discuss their retirement plans.

This is yet another problem that the industry and pre-retirees alike need to consider, because failing to get suitable advice can be just as financially damaging as failing to discuss the future with your partner. You need to make absolutely certain that you've found a retirement solution that will maximise your pension funds, because there'd be nothing worse than worrying about running out of cash.

Vince Smith-Hughes, retirement expert at Prudential, commented: "The gulf between those who are aware of retirement issues and recently announced Budget changes, and those who discuss the implications openly with their other halves, is alarming. However, simply having conversations about money is not enough. Taking action always needs to be the next step.

"For many couples, the first step to agreeing and securing a target income in retirement should be seeking professional financial advice together. As retirement becomes a more immediate prospect, a professional adviser or retirement specialist can help couples to make the right decisions about generating an income in retirement."

Seeking help from independent organisations, such as The Pensions Advisory Service (TPAS), could be a great first step, and the Government's offer of guaranteed guidance should make the process even less daunting. Or, why not consult our no-obligation annuity planning service to discuss your options? No matter how you go about it, advice is key, so don't put it off. Having those discussions with your partner and acting on them can make all the difference to your financial futures.

What next?

Read some of our retirement guides

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.