The following is a transcript of a bonus episode of The Pension Confident Podcast - Relationships and money. You can listen to this bonus episode or scroll on to read the conversation.
PHILIPPA: Hello and welcome to a bonus episode of The Pension Confident Podcast. And as it’s Valentine’s Day, our tips this time are all about relationships and money. And if you’re wondering what your relationships have to do with your finances, listen up because they do - from pensions to property and, crucially, even your credit score.
And if you’re taking a break from relationships right now, this is still for you because the relationships we’re talking about here aren’t just romantic ones - we’re talking about family and friends too!
So before we get into it, just remember that anything discussed on the podcast shouldn’t be regarded as financial or legal advice and when investing your capital is at risk.
Happy listening!
First up, Personal Finance Expert; Ellie Austin-Williams and Barrister; Paul Infield from episode 14 on moving in with a partner who already owns a 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 then 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 then 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 former partners, who formally cohabited, is where the property’s in one person’s name, but the other person has, say contributed to the payment of 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: Yeah.
Now, onto marriage where Paul told us all about what can happen to pension assets if you get divorced.
PAUL: 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 came in in the beginning of the 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. And that was often very difficult, if there weren’t enough assets and so on. But back in the day, the idea was that the wife got a third and the husband got two-thirds. If you think back in history, that’s what it was like! Now, ever since Pension Sharing Orders (PSO) came in, the courts do divide up the pension. There’s a thing called a pension attachment but nobody really uses that. What the courts use now is pension sharing which is literally - one part of one person’s pension is 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.
PHILIPPA: This is a Pension Sharing Order that we’re talking about?
PAUL: Yes, and following on from that, 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 be reducing my earnings for a bit and I’m going to be single parenting instead of 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 your pension is. But you just think, ‘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: Ever wondered if you should get a prenuptial agreement? Here’s more from Paul on the key need-to-knows about pre and postnups.
BECKY: Can you have a postnup?
PAUL: You can have a postnup as well, yes. Sometimes literally you have a prenup and then immediately after the marriage, literally after you sign the register, you sign the postnup because they’re even more binding. And that’s the first reason I think you should have it. The second thing, in some ways, is more important. It forces people to talk about one of those two, well 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 the couple not marrying because 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: It’s good to talk and, tricky as it can feel, it’s especially important to talk to your partner about money. Here are money influencers Lynn Beattie and Ola Majekodunmi in episode 23 with PensionBee’s Jasper Martens on exactly why that is.
LYNN: I think from the moment you know that, particularly a relationship, is getting serious, you have to have that financial conversation. And almost ‘marry up’ your money mindsets because I was married to a spender and I was a spender - that’s a really dangerous combination. Don’t be afraid to do it because marrying the wrong person is a really expensive mistake. Not just because of all the assets that have to be split, but getting divorced costs a lot of money.
OLA: Which people don’t talk about either, do they? I think, going back to the early stages of dating, a lot of people don’t ask about money spending habits. They may think it’s weird they were asked that on the date, but I think it’s really important to know. I think it’s a really important question.
JASPER: Would you ask that on the first date though?
OLA: First date? Maybe not. But third or fourth!
PHILIPPA: And getting back to pensions, here’s The Financial Times’ Claer Barrett from episode 17 on why you should keep your pension provider updated on your relationship status. I know it sounds weird but it turns out [that] it’s really important.
CLAER: Now, you can’t leave somebody your pension in your will, you have to fill in what’s called an ‘expression of wish‘ form. Now, I mention this because like any pension that you’ve got anywhere from any company, even old ones - you might have started your first job aged 21 and thought, ‘oh well if I die, I’ll pledge for my pension to go to my lovely boyfriend’. But then, by the time you start your third or your fourth job, you might have split up with him. You know, the relationship could be toast. But if you don’t go back to that pension provider and say, ‘actually I’d like to update my expression of wish form because I’m now married to Peter and I’d like him to get my pension’. So it’s well worth thinking about.
PHILIPPA: And finally, let’s hear from Emma Barrow from the Financial Services Compensation Scheme (FSCS) with a cautionary tale from episode 15 about how your ex-partner’s dodgy credit record can follow you around if you don’t keep an eye on your own credit rating.
EMMA: I remember when my boyfriend and I got a house together, we’ve had the house for a long time now, but I remember when we were buying that house, he didn’t have the best credit rating. In a prior relationship, his [ex-partner] had got into debt from what I remember. I remember the worry and the panic of [thinking], ‘are we going to be able to buy a house?’. And he was worried about whether it would affect my credit rating because I’d, by that point, worked on it. To be fair, I didn’t really understand how it would impact me. That’s the other thing, again, going back to education and understanding, [it] feels like a bit of a dark art sometimes - a credit rating. People don’t really understand how those joint relationships affect it. If you’ve got into bad credit, how do you get out of it? If you’ve got no credit rating, how do you build it? It does seem to be a knowledge gap for sure.
PHILIPPA: And that’s going to apply to all sorts of people. Divorced people and newly independent people. As you say, this business of being affected by previous relationships that you might not have had the agency about.
Useful tips? We hope so! Happy Valentine’s Day to all of you. You can listen back to all these episodes wherever you get your podcasts - we’re on YouTube now and the PensionBee app too! Keep an eye on our feed as our next episode will be live at the end of this month.
Risk warning
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.
