If you’re creating a financial plan as a couple, you should consider the effect one of you passing away could have. If one person’s income or assets are vital for the household’s financial security, it could leave the other in financial difficulty should they pass away.

One of the questions couples sometimes ask is: “Will my partner be financially secure if I pass away?” It’s a difficult topic to discuss. Yet, it can help you put a plan in place that gives you both confidence in the future even if the worst should happen. Financial planning as a couple can help you understand scenarios that could cause financial stress. This means you’re in a position to take steps to minimise the insecurity they could cause.

If you’re worried about how your partner would cope financially if you pass away, here are five steps that could improve their security.

1. Write your will

If you haven’t already, writing your will should be a priority, especially if you’re not married or in a civil partnership. “Common-law” partners have no legal right to inherit in the UK, no matter how long you’ve been cohabiting.

A will is the only way to make sure your assets are passed on according to your wishes. Despite this, data from Will Aid shows that 49% of UK adults have not made a will. Without a will, your assets will be distributed according to intestacy rules. This could be very different to your preferences.

Even if you’re married or in a civil partnership, you should still have a will in place. Under intestacy rules, if your estate is worth more than £270,000 and you have surviving children, grandchildren, or great-grandchildren, your partner will inherit:

• All personal property and belongings of the person who has died
• The first £270,000 of the estate
• Half of the remaining estate.

Again, this may not align with your wishes, so it’s important to set out what you’d like to happen.

2. Complete an expression of wishes for your pension

Your pension may be one of the largest assets you own, and it’s not covered by a will. Instead, you must use an expression of wishes to name the person you’d like to benefit from your defined contribution (DC) pension. This covers investments that remain within a pension, it does not cover withdrawals you have already made or an annuity.

If you pass away, your partner will be able to choose how and when they access the money within your pension. Withdrawals may be subject to Income Tax, but they could take a lump sum or use the pension to create an income.

If you have multiple DC pensions, you will need to complete an expression of wishes for each one.

3. Review any defined benefit (DB) pensions you have

If you have a DB pension, also known as a “final salary pension”, it will often continue to pay a pension to your spouse, civil partner, or dependents if you pass away.

A DB pension pays a guaranteed income from the retirement date for the rest of your life. It can create certainty and financial security when you give up work. As many of these pensions will continue to provide an income to your partner if you pass away, they can be valuable for creating peace of mind.

You should make sure you understand how much your partner would receive from the DB pension if you passed away, and ensure that any necessary paperwork is complete.

4. Purchase a joint annuity in retirement

When you retire, an annuity is something you can purchase to create an income. In return for a lump sum, an annuity can provide an income for the rest of your life. A joint annuity is designed for couples and will provide an income so long as either partner lives.

A joint annuity may offer a lower annuity rate than a single policy. This means the income provided will be lower, but it can be valuable. The amount provided after one partner dies may remain the same or it may pay out a proportion of the original income.

Keep in mind an annuity is just one way to access your pension and there are other alternatives that may be more appropriate for your circumstances. You should explore all your options before you purchase an annuity as these are normally irreversible. Please contact us if you have any questions.

5. Take out a life insurance policy

A life insurance policy will pay out a lump sum on your death to a beneficiary. It can provide financial security in both the short and long term. You will need to make regular payments to the policy, or the cover will lapse with no cash in value.

You can choose between a term life insurance policy or a whole-of-life insurance policy.

A term life insurance policy will run for a defined period. This can be a useful option if you’re worried about how your partner would cope with certain financial commitments, such as your mortgage. A whole of life insurance policy will run until you pass away and is generally more expensive. You can choose the level of cover and who will receive the lump sum.

As well as helping you with the above options, we can also help you arrange your assets in a way that provides the people who are most important to you with financial security, even if the worst should happen. Please contact us to discuss your priorities and the steps you can take as part of a long-term financial plan.

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 results.

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. 

The Financial Conduct Authority does not regulate will writing or estate planning.