How to protect love in a cold financial climate

THE TIMES   JANUARY 23

Iona Bain

With Valentine’s Day looming, many lovebirds will be planning a romantic getaway, long walks in the country, maybe some fine dining — certainly not a discussion about joint bank accounts.

However, if you can’t talk about money with your partner, you are storing up rather serious problems in your relationship for the future, experts say.

Research has found that financial conflict is the No 1 predictor of divorce across all income brackets, and married couples say that money misunderstandings are the biggest threat to their happiness — more than extra-marital affairs and bad sex, according to data from the Office for National Statistics.

So whether you are courting that special someone or navigating married life, here is some advice about handling the tricky issue of money in your relationships.

Love’s young dream

A hot date on February 14 will set you back almost Pounds 120 if you opt for cinema tickets, a meal for two, a drink per person and a five-mile taxi ride home, according to the website Currency Fair.

The psychotherapist and relationship expert Lucy Beresford believes that, if you ask someone out, you should foot the bill — at least on that initial occasion. “If you arrange future dates, the person who has been previously treated should at least offer to contribute or go dutch. That should spark a conversation about what arrangement makes you both happy — and keep having that conversation every time a bill arrives, to avoid misunderstandings.”

Men in particular should not assume their date earns less than them, and not all women will want to be paid for.

Beresford says: “We now live in an age where women earn just as much, if not more, than men. Getting an idea of what a woman does for a living will help you understand whether she wants you to provide for her.”

Getting serious

One way to prevent rows is to agree to cover joint expenditure — be it dates, holidays or rent and bills — in proportion to salary. So if you earn twice as much as your partner, you offer to pay two thirds, with your other half taking care of the rest.

If you move in together, these expenses should be detailed in a monthly budget and could be paid out of a joint account.

Claire Walsh, the head of advice at Unbiased.co.uk, advises both parties to have their own “play” account, even if one isn’t earning any money. “I advised a friend who has given up work to support her partner to request that he sets up an account for her into which he pays an allowance, otherwise she is in the demeaning position of asking for pocket money.”

There are also myriad dangers in relying solely on joint accounts. You may end up arguing about how the joint balance is being spent, since you can see one another’s expenditure. It can cause resentment if one partner feels they are being “spied on”.

You may be liable for an overdraft run up by your partner, who can also empty the account at any time. Your credit score may be tarnished if you open a joint account with someone who has a poor borrowing history.

If in doubt, keep accounts separate, and do not sign a credit card agreement or allow yourself to be a guarantor for loans taken out by someone with debt problems. This will not help them in the long run.

Have a contingency plan for if things don’t work out. Will you and your partner see out the rest of your tenancy, or will one of you move out? If so, will the departing individual find an immediate replacement or promise to keep paying the bills?

A shared home

If all is going well, you could both take out Help to Buy Isas, allowing you to double the bonuses (a maximum of Pounds 6,000) available from the government to contribute towards a home deposit.

The Help to Buy Isa, available from most banks, has all the advantages of an individual savings allowance, helping you to squirrel away Pounds 200 a month tax-free, but with the added perk of an extra 25 per cent being added on interest and contributions.

You need to save Pounds 12,000 to earn the maximum Pounds 3,000 bonus available, but two people saving to the hilt will have a hefty combined deposit of Pounds 30,000 at the end of it all. The best rate is 4 per cent from Halifax.

It is also worth having a plan in mind in case you split up. Would you sell and share the money? Would one of you stay in the home and buy the other out? You should definitely look into life insurance, or you could be left with a debt that you cannot afford to pay should your partner die (and vice versa).

Unmarried partners do not have the same automatic inheritance rights as married ones, so you need to make sure you have a will. The Money Advice Service recommends that co-habitees consult a solicitor.

While getting hitched is no longer the social convention it once was, it still has significant financial upsides, says Kay Ingram, of LEBC, the advisory firm. She offers couples financial advice, highlighting the inheritance tax that may be owed on assets and the fact that unmarried couples have no right to inherit Isa allowances from each other on death. Practically all the same financial benefits that come with marriage, including inheritance rights, also apply to civil partnerships for same-sex couples.

Tying the knot

Lucy Beresford thinks engaged couples over the age of 40 should take out a prenuptial agreement because of the rising divorce rate among the over-fifties. “You’ve got to clarify, in some sort of legal agreement, ownership of property and possessions, as well as responsibilities for payments towards things like future school fees. The older you get, the more careful you have to be.”

Prenuptial agreements are legally enforceable only in Scotland but are increasingly being taken into consideration by courts elsewhere.

According to Prudential the insurer, one in seven couples over the age of 40 lie to each other about their income and spending habits.

Kirsty Anderson, the retirement income expert at Prudential, says: “Couples could be sleepwalking into a situation where one partner is left with no income at all. Most couples will benefit hugely from a joint consultation with a professional financial adviser to discuss their pension saving and retirement income options.”

Married couples can switch savings, investments and rental income into the name of the lower-earning spouse to limit tax liability. They can also reduce or even eliminate the tax bill incurred from the sale of shares or property if the proceeds are split between both of their annual capital gains tax allowances.

Matrimonial tax perk

The Marriage Allowance could reduce your tax bill by Pounds 212 this tax year if one of you earns less than Pounds 10,600. You can transfer Pounds 1,060 of your personal allowance to your husband, wife or civil partner if their income is between Pounds 10,601 and Pounds 42,385. Not to be confused with the Married Couple’s Allowance, which is worth up to Pounds 835.50 a year and available if one partner was born before April 6, 1935. Apply at gov.uk/marriage-allowance.

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