4 pragmatic ways your pension could create long-term security for you and your partner

Deciding how to sustainably access your pension is often a big decision. If you’re planning with a partner, you might have an added layer of complexity – how can you make sure they’d be financially secure if you pass away first?

It may be a question that’s difficult to consider. Yet, if your finances are intertwined, particularly if one of you holds a greater proportion of assets, it could be an important one to contemplate now.

Dealing with the loss of a partner is challenging, and financial woes could place even more pressure on the bereaved. So, taking steps to ensure your loved one has an income or assets they can use should you pass away first could ease the stress they experience at an already difficult time.

Read on to discover four ways your pension could create long-term financial security for your partner.

1. Check if your partner would inherit your State Pension

The State Pension is often valuable in retirement as it provides a guaranteed income that, under the pension triple lock, increases each tax year to maintain its spending power.

To claim the full new State Pension, which is around £11,500 in 2024/25, you need at least 35 qualifying years of National Insurance contributions. The new State Pension was introduced in 2016, so if you receive the old State Pension, the amount of income it provides may be different.

According to a report in FTAdviser, only half of the people claiming the new State Pension receive the full amount. In addition, around a quarter of people who are claiming the old basic State Pension don’t receive the full rate either.

So, it’s worth checking if your partner receives the full amount from the State Pension, and how the loss of your State Pension could affect their financial stability.

In some cases, a spouse or civil partner may inherit an extra payment on top of their State Pension if they’re widowed.

The rules around inheriting State Pension entitlement are complex and will be affected by a range of factors, including:

• The date you reached the State Pension Age
• The date of your marriage or civil partnership
• Your partner’s existing State Pension entitlement
• Whether your partner paid a reduced rate of National Insurance for married women.

Please contact us if you’d like to understand if your partner would inherit a portion of your State Pension.

1. Review your defined benefit pensions

If you have a defined benefit (DB) pension, also known as a “final salary pension”, you’ll usually receive a guaranteed income from your retirement date for the rest of your life. Often, the income provided will rise in line with inflation.

As a result, a DB pension could be a useful asset that helps you create security in retirement. A key benefit of many DB pensions is that they’ll continue to provide spouses, civil partners, or dependants with a regular income if you pass away.

You can check your paperwork or contact your pension scheme to see what income your partner could receive if you die first.

1. Use your retirement savings to purchase a joint annuity

If you have a defined contribution (DC) pension, you’ll have a pot of money when you retire that you can access in several ways. One option is to purchase an annuity, which would provide you with a guaranteed income in retirement. There are several different types of annuities that you could consider.

When you’re retirement planning as a couple, a joint annuity could be a useful way to ensure that a widowed partner continues to receive a regular income.

Usually, the surviving partner would receive a portion of the income that the annuity originally provided. So, it may be important to consider the day-to-day expenses your partner will need to meet when assessing which annuity is right for you.

Annuity rates affect how much income you’ll receive, and they can vary significantly between providers. Shopping around could help you get more out of your retirement savings and provide greater financial security. If you’d like our support when accessing your pension or purchasing an annuity, please contact us.

1. Complete an expression of wish form for your pension

It’s also possible for your partner to inherit the money that remains in your DC pension. However, research suggests that many pension savers risk their money going to the wrong person.

Usually, your pension is not covered by your will. Instead, you use an expression of wish form to inform your pension provider who you’d like to receive your pension. While an expression of wish isn’t legally binding, the pension scheme will consider it when deciding who should inherit your savings.

A survey from Canada Life suggests that more than half of UK adults have not completed an expression of wish form and risk their savings going to someone else. So, if you want to ensure your partner’s financial security should the worst happen, completing the form might be an essential step to take.

If you have more than one DC pension, you’ll need to complete an expression of wish form for each one.

Financial confidence could also play a role in your partner’s long-term security

While passing on an income or pension wealth might provide your partner with the assets they need to create financial security, do they have the confidence to manage their finances themselves?

If you usually make financial decisions, suddenly taking charge could be overwhelming for your partner. They might be unsure about how to use the assets they’ve inherited, which could mean they fall short of an opportunity for financial security.

So, if you don’t manage your finances jointly already, you might want to consider involving your partner in your decisions now. Working with a financial planner together could mean your partner has someone to turn to when they’re potentially making financial decisions alone in the future.

Contact us to talk about your long-term financial plan

As your financial planner, we can work with you to create a financial plan that not only considers your goals but your worries as well. If you’re concerned about how your partner would cope financially if you were to pass away first, we may be able to help.

Please contact us to arrange a meeting to talk about your long-term financial plan and how to create security for both you and your partner.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.