Retirement planning shift needed as cohabitation and single person households grow

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, comments on the publication of the ONS families and households data, showing a retirement planning shift is needed as cohabitation and single person households grow.

Key points from publication:

• • Opposite-sex cohabiting couples were the fastest growing family type over the last 10 years.
  • In 2022, these made up 18% of all families, an increase from 16% of all families in 2012.
  • We are also seeing the number of older people living alone on the rise. In 2022 51% of those living alone were aged 65 or over compared to 45% a decade earlier.
  • Women continue to account for the majority of those living alone age 65 years and over (64%), this proportion has been reducing over time (69% in 2012).
  • This reflects the greater increases in male life expectancy seen in recent years, as more men are living alone at older ages.

Helen Morrissey says:

“The UK’s living patterns continue to shift. Married couples may still make up the majority of households, but this is on the decline as the number of people choosing to cohabit rises.

“Some of these couples will go on to marry but others will have no intention of doing so.

“We’re also seeing the number of people living alone continuing to grow strongly, particularly at older age groups.

“The number of men aged over 65 living alone has soared as a result of increasing life expectancy.

“These shifts turn traditional financial planning on its head.

“A cohabiting couple has different rights to one that is married or in a civil partnership, while a single person needs to make further provision to secure their financial resilience, and this can cause challenges.”

Cohabiting:

“Many people believe that once they’ve lived together for a period of time, they acquire common-law marriage status.

“However, this isn’t the case and without appropriate financial planning cohabiting couples can be at real risk of financial detriment should one partner die.

“Many pension providers will pay out death benefits to a cohabiting partner, but it isn’t guaranteed and so it is vital that expression of wishes forms are kept up to date to make sure the right person gets the pension should the worst happen.

“Keeping wills updated is also key in making sure your family is provided for and your financial wishes are respected.”

Living alone:

“More of us are living alone and this presents its own financial challenges.

“The Pension and Lifetime Savings Association’s retirement income standards say a single person needs an income of £23,300 per year to live a moderate lifestyle in retirement while a couple needs £34,000.

“This shows single people have an extra mountain to climb in terms of achieving financial resilience in retirement which isn’t helped by the fact that single people need to shoulder the ongoing burden of paying their bills and household expenses single handed.

“Recent HL research put the cost of being single at a whopping £860 per month.

“Small shifts, such as upping your pension contribution whenever you get a pay-rise or move jobs, can really boost your pension and you should also check to see how much your employer is willing to contribute to your pension to make sure you get the most from your contributions.

“This can be very difficult at times like these when the rising cost of living is putting everyone’s finances under pressure.

“For many people, living alone isn’t a long-term thing but for many others it will be, and the reality is they will need to contribute more to their pensions to enjoy the same standard of living as couples.”

Divorce:

“Divorce can derail your financial planning as the long-term plans you put together as a couple fall apart and you have to rebuild your financial resilience.

“As well as having to shoulder more of the bills you may face the longer-term issue of having to revisit your pension planning.

“If you put your own pension on the backburner because your partner had generous provision you could find yourself approaching retirement with little, if any pension of your own.

“It may not be romantic to plan for the worst while still married but it is a solid plan to do all you can to build your own pension.

“It is also important that pensions are a part of any financial settlement on divorce.”

Kindly shared by Hargreaves Lansdown

Main article photo courtesy of Pixabay