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Why single people need to take a different approach to financial planning

Category: News
A woman sunbathing on an empty beach

As attitudes towards relationships change, more people are happy being on their own.

According to the BBC, 59% of single people surveyed said they were “content with their relationship status”. The reasons for this vary, with some people believing that they have more freedom to pursue their own goals while single. Others may simply prefer living on their own instead of sharing their space with another person.

Further to this, there are many people who are currently single but hope to enter a relationship if the right opportunity presents itself.

There are several unique challenges single people may face when managing their wealth. For example, research reported by FTAdviser found that single people needed an average of £160,000 more than couples to fund their lifestyle in retirement.

Read on to learn about how being single could affect your financial plan.

Single people spend an average of £860 a month more than those in a couple

One of the main financial challenges that single people face is that their living costs are likely to be much higher than couples.

Indeed, as reported by the Guardian, single people spend an average of £860 a month more than couples. This is likely because they have to take on a range of different costs alone, while people in a couple can split them.

Often, expenses are not halved because the person lives alone, making the financial burden much greater. These include:

  • Mortgage or rent costs
  • Council Tax – while you can get a discount if you live alone, it is only 25%
  • Utility bills
  • Internet and TV subscriptions

This means your outgoings will likely be much higher if you are single. Consequently, as FTAdviser reports, a single person would need to save, on average, £160,000 more than people living as part of a couple to achieve the same lifestyle when they retire.

This could make it more difficult to build your retirement savings if you are single.

Saving for retirement can be more challenging on your own

Typically, couples may have a higher household income than single people if they both work. Plus, their individual outgoings may be lower as they can split certain costs.

As a result, people in couples may have far more expendable income than single people, meaning they can contribute more to their pensions, savings, and investments.

Additionally, couples enjoy certain joint financial planning benefits that single people do not. For instance, they may be able to contribute to one another’s pensions to ensure that they benefit from both their Annual Allowances and potentially maximise tax relief.

Couples can also use two ISA allowances and Personal Savings Allowances, allowing them the potential to double the amount that they can save or invest tax-efficiently.

If they are married or in a civil partnership, couples may also receive certain financial benefits they can utilise as a couple including:

  • The Marriage Allowance
  • Inheritance Tax (IHT) exemptions
  • Capital Gains Tax (CGT) exemptions.

Taking advantage of these joint planning benefits, and making decisions about retirement as a couple, could make it easier to build wealth and pass it on to loved ones.

Single people may be less likely to seek financial support

Research also suggests that couples are more likely to seek advice about retirement planning than single people.

Indeed, according to Irwin Mitchell, 29% of married couples had taken some advice about their retirement, compared with only 20% of single people.

As a result, only 17% of single people knew how much they needed to save for retirement and how to achieve this, compared to 32% of married people.

Ultimately, this means that many single people are less able to contribute to retirement savings and may lack the financial knowledge to plan for later life. Fortunately, with the right support, you may find it easier to meet your savings goals and achieve your desired lifestyle in retirement.

It could be more difficult to pass wealth to your loved ones if you are single

If you are married or in a civil partnership, you can normally pass on your entire estate to your spouse without an IHT charge. You and your spouse can also inherit one another’s unused “nil-rate bands”– the amount that you can pass on without IHT – of £325,000 in the 2023/2024 tax year.

You could also inherit one another’s “residence nil-rate band” of £175,000, which applies when passing on your main home to a direct descendant.

By adding the unused nil-rate bands to their own, the surviving spouse could potentially pass on up to £1 million without IHT.

Conversely, single people or unmarried couples only benefit from their own nil-rate bands, meaning they can pass on half as much before triggering an IHT charge.

As such, it may be more difficult to pass wealth on to your loved ones if you are single, and you may need to consider this when creating an estate plan.

Working with a professional could help you improve your financial plan

If you are single and you are concerned about your retirement, working with a financial planner may benefit you in several ways.

Firstly, they can discuss your goals and desired lifestyle in retirement and help you determine how much you need to save to achieve this. They can also use cashflow planning to help you assess your outgoings and account for the increased costs you may face as a single person.

Once you have clear goals in mind, your financial planner can offer guidance about your pension contributions to ensure that you are on track to meet your savings goals. They can also help you find ways to save and invest tax-efficiently.

It may also be useful to discuss your estate plan with a professional as they can help you explore different ways to pass on your wealth.

Get in touch

Single people can still enjoy a comfortable retirement with the right support.

Please get in touch to find out how our team of VouchedFor Top Rated planners could help today.

Please note

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

The Financial Conduct Authority does not regulate cashflow planning.

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 value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

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

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