PHILIPPA: Hello and welcome back to The Pension Confident Podcast with me, Philippa Lamb. This month, hot off the heels of Valentine’s Day, we’re looking at the difference your relationship status can make to your finances.
There are so many ways to be in a relationship. Right now you might be happy just concentrating on yourself. Maybe you’re looking around for a new partner. Some of you will be cohabiting, living with a friend or even a sibling. Maybe you’re married or in a civil partnership. Perhaps you’re separated, divorced or widowed. Most of us are going to cycle through at least a couple of those situations in our lifetime. But each one brings its own financial questions and challenges. So today we’re going to put relationships under the microscope and look at how you can take care of your finances, whichever one you’re in.
I’m joined by three guests with plenty to bring on that. Personal Finance Expert and Blogger at This Girl Talks Money; Ellie Austin-Williams. Hello Ellie.
ELLIE: Hello. Thank you for having me.
PHILIPPA: Next we have Barrister, Mediator, Family Arbitrator and a Spokesperson for the free legal assistance charity Advocate; Paul Infield. Hello Paul.
PHILIPPA: And lastly, Becky O’Connor is with us; PensionBee’s Director (VP) Public Affairs. Hi Becky.
PHILIPPA: Before we start, here’s the usual disclaimer. Please do remember anything discussed on this podcast should not be regarded as financial advice and when investing your capital is at risk.
Now we’re going to be talking about all sorts of relationships today. To focus our minds, I was thinking it would be interesting to ask all of you which of your relationships so far has had the biggest impact on your finances and why. Have you ever thought about it?
ELLIE: Yeah, so I think this is probably the biggest lesson that I’ve learned. Before I met my current partner, I lived with a previous boyfriend and I lent him a significant amount of money. You can probably guess where it’s going. The relationship broke down and I needed to cut ties. So I had to walk away and forget about the few thousand pounds that I had lent him. Luckily I was in a position where my family could help me, but it was a really messy time financially. We had a rental agreement, so I had to move out and pay rent somewhere else whilst also paying rent on the place we shared. But, I always say to people that it was the best thing for my mental health at the time and I wouldn’t change that. Sometimes you’ve gotta just cut the losses and walk away.
PHILIPPA: It just goes to show. That’s why we’re having this conversation. You need to look after yourself, don’t you?
BECKY: Directly and indirectly there are two relationships, if I may? Directly, my current husband has had the biggest bearing because we’ve bought houses together and we’ve had children together.
PHILIPPA: Does he know you talk about him as your current husband?
BECKY: Whoops. I’ll avoid him listening to this podcast! Indirectly, there was an ex-boyfriend of mine who lived in London. Through being able to stay with him, I was able to do work experience which helped tremendously with my career. So I’d like to give him credit too.
PHILIPPA: Yeah, absolutely. Paul?
TIMI: Yes. Organised chaos.
PAUL: Well, it’s got to be my marriage. I’ve been married for 36 years as of last Monday. When I met my wife 40 years ago, she earned more than me. She was a teacher, as she still is. She apparently thought, ‘nice chap, pity he doesn’t earn more’. I’m not sure she still thinks I’m a nice bloke, but I earn more than her now. We’ve had two children who are now grown up, but children, of course, are a considerable expense.
CHALLENGES FACED BY SINGLE PEOPLE
PHILIPPA: Yeah, they are. There’s a lot to talk about here. Should we start at the beginning with leaving home? If we think about our lives sequentially. It’s happening later and later, isn’t it? The Office for National Statistics (ONS) tells us living with parents is now the most common living arrangement right up to the age of 34, which is an amazing thing, isn’t it? A big change. Whenever you do it, it’s a huge step, isn’t it? What do we think people should be thinking about when they do that?
ELLIE: Well, this is something that I talk to a lot of people about regularly. It’s becoming so much more difficult to leave home. Not just buying houses, also the cost of rent. Since the pandemic we’ve seen rental prices go through the absolute roof and there are so many different factors contributing to it. Increasingly people are wanting to come back into the cities. They’re wanting to start their social lives again. They’re wanting and having to go back into the office more, but I do think there are big benefits to that. Some people need to live closer to where their friends are and their place of work. It’s putting a lot of pressure on young people in particular, who have less assets and who typically earn less financially. They’re in a really precarious position and it’s getting harder to save, especially for the amount of money needed to think about buying property these days.
PHILIPPA: Yes, and it’s all the associated costs, isn’t it? It’s not just the rent or the mortgage. It’s the TV licence, it’s the insurance, it’s everything.
BECKY: I think it’s interesting that it’s affecting students now as well. More students are living at home for longer or choosing a university close to home because then they can save by living with their parents. Even the traditional house share’s becoming that bit too unaffordable for some people. Then you think about the associated issues that come with living with your parents for a long time. If you do meet somebody, then do you live with one set of parents? This is another big conversation if you’re trying to save money. It can be a good solution, but obviously, it has associated problems such as living with parents for perhaps longer than you would want to.
PHILIPPA: Sure and for them as well.
PHILIPPA: I always think about all the things you don’t think about that your parents pay for, like the Netflix subscription. All those little things that you don’t immediately think about like gym memberships and eating out, they’re going to pick up the tab, aren’t they? But if you’re living away, all those bills are for you.
ELLIE: Yeah. It’s really expensive. I think there are things that we don’t necessarily think about as well, like the emotional impact of living at home until you’re a lot older. It can encourage people to make decisions about things like relationships quicker, which is not always something that’s positive. I think that desperation or that desire to get out of your parents’ home can lead people to making decisions about moving in or buying property with a partner, friends or siblings quickly, and not necessarily thinking through all of the potential consequences down the line.
BECKY: Which could actually break the relationships sooner as well, couldn’t it? Because if you’re doing all those things too quickly, then the chance of it actually not surviving and thriving is perhaps greater too.
PHILIPPA: And of course you don’t have to be young, do you? To be single? Definitely not. I mean there’s more than 28 million single people living in the UK right now. And of course all of them are subject to that thing we call the ‘singles tax‘. That horrible reality that living on your own costs you more. So just remind us what sort of things we’re talking about.
BECKY: Well there’s economies of scale to living with one other person or four other people because you save on energy, you save on all the fixed costs of being in a house and living. You save on food costs if you eat together. Preparing a meal for four people’s generally cheaper per person than preparing a meal for one person or buying a ready meal. With Council Tax, there are discounts for single people, but it’s not 50%. It’s not proportionate. It’s partially recognised, but generally speaking, the ‘singles tax’ refers to you not benefiting from the economies of scale of living with more people.
PHILIPPA: Quite a lot of leisure activities are outrageously expensive if you’re single, such as holidays and gym memberships where you’re not getting a couples discount.
ELLIE: Things like car ownership as well. Even with travel, there are railcards that you can get, which give you a benefit, the two person ones. It’s just these little things that, sometimes, you don’t necessarily think about when you’re a couple. But when you’re single, this really has a huge impact on your financial situation. To have a discount makes sense when you’re travelling in a couple. I understand it from an economic perspective, but it doesn’t make it fairer.
PAUL: I agree that there are lots of financial advantages to being in a couple. The one that I think’s worth mentioning is that if you’re single, you still need to think about writing a will because a lot of people don’t write wills. I did a trawl around my place of work some years ago and over half of my fellow barristers in my chambers had not written a will, and I simply asked them whether they thought they weren’t going to die. I wrote my first will when I was 18 because I was travelling away from home and thought it was sensible to leave what little I had to somebody.
PHILIPPA: That was sensible.
PAUL: I think my father bullied me into that, but it’s something that people ought to think about very early.
PHILIPPA: Yeah. I was thinking about the marriage allowance because the tax system directly rewards couples, doesn’t it?
BECKY: So that’s when you can grant a lower earning spouse some of your tax allowance, basically. It depends on the earning level of each person in the couple, but it can be beneficial. That’s probably the most significant tax benefit, but actually, a lot of people don’t use it because they don’t know about it. So it’s there, it’s a benefit of being married, but it perhaps doesn’t make a huge difference between being single and being in a couple, if you’re not going to use it anyway.
PHILIPPA: This is the state encouraging us to get married isn’t it, in a very old fashioned way?
So thinking more positively, what can a single person do to turn that situation on its head? Instead of paying a financial penalty, what can they do to give themselves a financial advantage? We were brainstorming this before the podcast. We came up with a few things. My first one is that you do need to become an expert on your own finances, don’t you?
BECKY: You can embrace it. I was single for a large part of my twenties. I lived in a house share. It was brilliant. I loved my housemates. Obviously, that doesn’t always work out. It can go wrong and I suppose you open yourself up to more risk if you’re constantly moving between house shares with people you don’t necessarily know. But, it can also be great fun. So I would say embrace it, it’s an exciting life phase, particularly if you’re happy to meet lots of new people and go on holiday with strangers sometimes as well, and you’re doing a group booking instead of going completely on your own.
PHILIPPA: Speaking for myself - when I was in my twenties and sporadically single, I know that emotionally I wasn’t planning ahead financially. I was kind of thinking that, at some point I’m gonna couple up and we’ll do that together. I didn’t have agency around thinking about what my goals were. What do I want? What should I be saving for? I certainly didn’t have a pension.
BECKY: Were you thinking of marrying a rich man though?
PHILIPPA: There was no planning going on at all.
ELLIE: It’s so hard now because I do think that a lot of people think like that. Particularly because of the cost of things like property and the ability to borrow. It’s simple - if there are two of you, it’s much more affordable. You can borrow more money to buy a property. There are also these huge benefits to being single and I do sometimes look at my single friends and think, ‘oh my gosh’, you can just get up and go and travel, or you can move abroad or you can explore without having to think about someone else’s job, someone else’s situation and someone else’s finances. You can explore more and use your money how you want to use it rather than how both of you collectively want to to use it. Which I think can be a really good thing.
PHILIPPA: It’s that idea of stretching yourself, even when you’re single. If you can buy property and you know you want to in the long-term, you probably should, shouldn’t you? Because it’ll be yours, you’ll get all of the long-term capital gain and your home security isn’t dependent on your relationship, which is a big one isn’t it? I mean, a lot of people lose their homes when their relationships break up, even if it’s just a rental.
BECKY: Yeah. I don’t think it’s a good idea to wait for somebody before you start thinking about these things, including a pension obviously. Just get on with it to the extent that you can. Obviously, we’ve discussed how it’s harder, or can be harder, because you’re paying more living costs. So you have less spare at the end of every month to help you build up that wealth. But there are also savings to be made. Just go and build as if you’re going to go through life on your own and then if you don’t, that’s great.
ELLIE: I think buddying up with people is a good idea. You don’t have to be in a couple romantically to benefit from sometimes splitting costs. So asking people, if you’re going to something like a weekend away, if you can split the costs, if you can share a ride. There’s sharing hotel rooms as well. Things like hen parties or weddings are expensive to attend as a guest a lot of the time, but if you’ve got another friend or an acquaintance who’s going, who’s single, why not just get a room with two single beds and share the cost?
WHAT TO THINK ABOUT WHEN IN A COUPLE
PHILIPPA: Like singles, couples come in many different forms, don’t they? It might be a romantic relationship, it might be a family member or a friend. Paul, what should people be thinking about as part of a couple? Because there’s a whole load of ways of doing it. People might be married, civil partners, siblings or friends.
PAUL: Well let’s start off by talking about simple cohabitation. Let’s face it - over half the people in Britain now, who live together, are not married or in civil partnerships. They’re cohabiting without the benefit of legal ties. I say the benefit of legal ties because I do actually think there are benefits to the legal ties. There are a lot of people out there who think that they have some legal protection if they’re cohabiting for a period of time.
PHILIPPA: The common law idea? Is it anything? Is it a reality?
PAUL: No, it never has been. Certainly not since 1753. And there’s a controversy about whether it existed before the Marriage Act of 1753. Every now and again I end up with, normally a woman, sitting across my desk talking about common law marriage. She’s been living with a man for say 20 or 30 years. She’s brought up his kid, she’s given up her own career to do that, the children have left home and he has now left, perhaps run off with somebody else, and I have to tell her that she’ll get nothing. That the law doesn’t provide for her.
PHILIPPA: Literally nothing?
PAUL: Literally nothing. If the house is in his name, as it very often is, and the children are gone, she gets nothing.
PHILIPPA: It’s appalling isn’t it?
PAUL: It is appalling.
PHILIPPA: I’m sure most women don’t know.
BECKY: How much do you get if the children are still under 18?
PAUL: You get money from the Child Maintenance Service. But there was a proposal from the Law Commission back in 2005, that after a period of time, you should get some protection - not equivalent to marriage, but some protection. That’s obviously gone on a shelf somewhere in a government department and has remained there because apparently there’s opposition from the church.
PHILIPPA: So if you don’t want to marry and you don’t want to get into a civil partnership, but you’re planning on living with someone, what arrangement should you come to, to protect yourself?
PAUL: You should enter into a cohabitation agreement and they’re very easy to draw up. Most solicitors won’t charge you more than a few hundred pounds to draw one up and it forces you to talk about money, which people often don’t talk about. And of course, if you find yourself in a relationship where the house is in the other’s name, you should be talking about what happens if things go wrong.
ELLIE: I think property’s a really interesting and also complex area when it comes to couples because you’ve got so many variations of what can happen. I think even from a very basic perspective, knowing if you’re buying the property together, and discussing whether you’re buying as tenants in common or as joint tenants is a big decision. Especially if you’re putting in different amounts of money towards the property, then you might want to discuss whether you should look at being tenants in common so that you’re represented proportionally rather than down the middle, which I think a lot of people don’t think about.
PAUL: Should I just explain the difference between those two?
PAUL: Joint tenancy and tenancy in common have nothing to do with renting, by the way, even though the word tenancy appears in both. A joint tenancy means, effectively, that you both own the whole thing. Though people sometimes prefer to think of it as a 50-50 split. And you can only have two people in a joint tenancy. Tenancy in common is when you own in different proportions. So as you say, if you’ve put in different amounts of money, you can actually set out, normally in a declaration of trust, when you buy the property - who owns what. That’s one way of protecting yourself, but that’s a conversation to have when you’re buying the property.
PHILIPPA: Because the other situation that pops up a lot is, and it’s usually this way round I think, women move into their boyfriend’s flats and even though he may be paying the mortgage for the next 10 or 15 years, if you stay together, you’re paying other bills, aren’t you? So you’re contributing equally to the household budget, but at the end - that flat’s still his.
ELLIE: It’s a really interesting one because I actually see a lot of cases where it’s the other way around. Where it’s a male moving into a female’s property and women asking this question. How do you get a contribution from the person that’s moving in without them developing any right over the property?
BECKY: Would that come back to the cohabitation agreement?
PAUL: Well it does because the way that cases often end up on my desk from formal partners, who formally cohabited, is where the property’s in one person’s name, but the other person has say, contributed to the payment to the mortgage either directly or indirectly by paying other bills and so on. And they say, ‘well I’ve got an interest in that property because of that.’ And that’s why it’s sensible to have that conversation beforehand. There’s one other difference by the way, between joint tenancy and tenancy in common, which perhaps isn’t directly important, but it’s important when one of them dies because under a joint tenancy, there’s a thing called the right of survivorship, which means that the whole property goes to the survivor. Whereas that doesn’t affect tenancy in common. And that may mean that the person who ends up with the property isn’t the person who you might want to end up with the property.
BECKY: And these agreements between the joint tenants and tenants in common apply to non-romantic relationships as well. It’s quite important to point that out to single people.
PHILIPPA: Siblings or friends or whoever. Yeah.
ELLIE: It’s one of those things I remember when we were buying our flat that never actually gets explained and I only know about it because I studied law. It’s basically a box that you have to tick when you’re going through the piles of paperwork to buy a property - whether you want to be joint tenants or tenants in common. Most people, they’ve never had it explained to them.
PAUL: Most good conveyancing solicitors will actually provide you with some information beforehand which explains it. But I have to say, I think most people don’t read it.
PHILIPPA: There’s so much going on when you’re buying a property.
WHAT HAPPENS WHEN YOU SEPARATE?
PHILIPPA: Should you have one?
PAUL: Yes. You should have one for two reasons. Although they’re not binding, the courts have said they’re of magnetic importance. So they’re very influential. And I’ve dealt with a number of cases, with prenups, where the courts have basically said, ‘yes, we’ll go with the prenup.’
BECKY: Can you have a postnuptial agreement?
PAUL: You can have a postnup as well, yes. Sometimes there are cases where you have a prenup and then immediately after the marriage, literally after you sign the register, you sign the postnup because they’re more binding.
The second thing, in some ways, is more important. It forces people to talk about one of those three things that British people in particular find very difficult to talk about, which is money. I’ve actually been involved in the drafting of a prenup, which ended up with a couple not marrying. My advice was that I thought the prenup was so unfair that the courts wouldn’t enforce it. So my client, who was the intended husband, decided not to go ahead with the marriage.
ELLIE: Rather than amend it?
PAUL: Rather than amend it. And actually, the couple really ended up finding out what each other were like courtesy of the intended prenup.
PHILIPPA: We’ve talked a bit about holding onto your financial independence, whatever form of relationship you’re in. If it’s a sibling or a friend, you’re probably going to do that anyway. But if it’s a romantic involvement, and I’ve always done this, and some men haven’t liked it - I’ve always liked the idea of having my own bank account. I’ve been married twice. My ‘current husband’ is perfectly okay with this. I’ve always liked the idea of having my own account. We’ve shared accounts including savings accounts. But, if I want to go and spend on something a bit crazy, I earn money, so I like to go out and spend it without having any sort of conversation about it. It’s generally that sense of, if anything goes wrong, you’ve got your own money. What’s the feeling about that? Do you do that?
ELLIE: Absolutely. We run all of our finances day-to-day from a joint account. But we do also have our own individual accounts and then we also have our own savings accounts, which is also largely tax related as well, because we earn different amounts of money. So, you get different allowances and you want to make the most of your personal allowances. We’re quite unusual, I would guess, in the sense that I actually control most of our finances. So most of our savings are in my name, which is great for me. Less so for my husband. He sometimes does say, ‘I hope you don’t ever think about running away.’ But that’s just how it’s ended up. But I would say we’re pretty good at talking about it.
BECKY: We have one shared account and then I have my own account, but my husband doesn’t have his own account as well. So, I feel a bit bad about that now. It’s just so that I can see my own spending. I filter through what I’m going to spend in my account and then I can keep track because it’s a digital bank account. I can see every time I spend something, it sends me a notification and adds it all up for me.
PHILIPPA: I love that.
BECKY: It’s really good.
PAUL: It is. By the way, my wife and I have never had a joint account.
PHILIPPA: No joint account of any kind?
PHILIPPA: Not even a savings account?
PAUL: Not even a savings account. We each have our own and always have.
ELLIE: I find it so interesting, that kind of dynamic. It’s actually reminded me of something that a lot of people might not think about discussing, which is to do with having children and being on maternity leave. I’ve seen suggestions, which I think are great, suggesting that male partners could top up the pension contributions of the female partner while they’re off work, to make sure they’re not missing out.
PHILIPPA: We’ve talked about this on the podcast before. It’s an excellent idea and pretty much no-one does it, do they? The higher earner, the person who’s still working should be paying pension contributions for the other person and why not?
PAUL: And you had to ‘offset’, as we call it. So the person who didn’t have the pension got more of the non-pension assets. For example, if there weren’t enough assets. Back in the day, the idea was that the wife got a third and the husband got two thirds. Now, ever since Pension Sharing Orders came in, the courts do divide up the pension. In pension sharing, part of one person’s pension’s literally transferred to the other person and they can invest it normally however they like, sometimes they have to keep it with the same pension provider. What I often find is that women will say to me, ‘I’m prepared to do without a Pension Sharing Order so that I can get more of the house.’ And I always say, ‘no no no no, you’ll really need a pension when you’re 67.’ Coming back to your question about pensions. When I went to the bar in 1980, you could do nothing with pensions. And that continued until the Pensions Act 1995, but it really changed in the early 2000s.
PHILIPPA: So whoever had the pension, it was their pension?
PAUL: And you had to ‘offset’, as we call it. So the person who didn’t have the pension got more of the non-pension assets. For example, if there weren’t enough assets. Back in the day, the idea was that the wife got a third and the husband got two thirds. Now, ever since Pension Sharing Orders came in, the courts do divide up the pension. In pension sharing, part of one person’s pension’s literally transferred to the other person and they can invest it normally however they like, sometimes they have to keep it with the same pension provider. What I often find is that women will say to me, ‘I’m prepared to do without a Pension Sharing Order so that I can get more of the house.’ And I always say, ‘no no no no, you’ll really need a pension when you’re 67.’
PHILIPPA: But it’s tricky. I’ve been in this situation myself. If you’re raising small children and you divorce, you’re primarily thinking, ‘I’ve got to have the house’. Because I’m probably going to have my earnings reduced for a bit, I’m going to be single parenting instead with someone else. But I speak from experience and understand, as a former Personal Finance Journalist, that the pension could even be your biggest asset depending on how big it is. But the thinking can be, ‘well, I’ve got time, I’ll deal with that later’. But as you say, women can pay a penalty.
PAUL: Yes, I’m not saying you shouldn’t take the house rather than the pension. All I’m saying is that you need to think about it and not discount the pension.
PHILIPPA: Divorce is not the only reason you might find yourself on your own. If your partner dies, the financial ramifications can be a terrible burden on top of the emotional strain. What should you think about at that point, Paul, if you can?
PAUL: Well, the first thing is to look for the will. If there isn’t a will, then you’re stuck with the rules on intestacy, which if you’re married, normally means that you get most, if not everything. And of course, as I said, if you’ve got a joint tenancy, you get the house automatically. If the will or the intestacy doesn’t leave you enough, then you should talk to a lawyer to make a claim under the Inheritance Provision for Family and Dependants Act 1975, which I’m afraid’s a very long title for a law. What it provides is that the courts can give you reasonable amounts. So, in effect, rewrite the will.
PHILIPPA: That’s great isn’t it?
PAUL: It’s not just spouses who can do that. It’s also cohabitants, former cohabitants, children and so on. There are a range of people who can make claims under that act.
PHILIPPA: I’m going to wrap it up there. There’s so much more we could talk about. It’s always the way on these podcasts, but I think we’ve covered a lot of ground, haven’t we? So, thank you very much everyone.
BECKY: Thank you.
ELLIE: Thank you.
PAUL: Thank you.
PHILIPPA: Dig into the show notes for links to all the resources and organisations we’ve discussed.
A final reminder that everything you’ve heard on this podcast should not be regarded as financial or indeed legal advice. And whenever you invest your capital is at risk.
Next month, we’ll be looking at financial inclusion. How do we level up financial services and make sure that everyone can access them?\ Now looking ahead, we’re also excited to let you know that on Thursday the 4 May, we’ll be recording a special episode of The Pension Confident Podcast in front of a live audience at White City Place in London. We’ll be exploring the best places to save your money from ISAs to pensions with some very special guests. Now, if you’d like to join us, tickets are free and you can get yours by clicking on the Eventbrite link in the episode description. It’s that simple. We’d love to see you there.
Finally, we’d also love you to rate and review us on a podcast app and you can keep track of what we’re up to at pensionbee.com/podcast. Thanks for being with us today.
As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.