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For a married couple, working out when to retire and who should do so first, used to be a relatively simple decision. That’s because it was largely based on when your respective pension payments started.
But the increasing shift away from so-called final salary, or defined benefit schemes, to defined contribution pension arrangements, means there’s now a lot more to weigh up. In fact, there a range of factors to consider and they’re neither just financial nor timing-related.
We’ve spoken to pensions experts about the potential retirement planning hurdles that couples can face and look at the issues that should be considered to help plan ahead successfully.
What’s on this page?
Thirty years ago, defined benefit, or DB pensions - which pay a guaranteed income based on length of service - were the norm for many of the UK’s workers, regardless of whether they were employed in either the public or private sector.
Fast forward to today, and an increasing number of people in their fifties or sixties are now approaching retirement supported by defined contribution, or DC, pensions that they’re effectively in charge of themselves.
According to Andrew Oxlade, a director at Fidelity International, these arrangements are more flexible, for example they give individuals the ability to retire at their own pace. But they also make the decision-making process more complicated.
He says: “Under older, DB pensions, retirement timing was often simpler. You had a predictable lifetime income that began at a certain age, commonly 62 or 63, and which often provided benefits to your partner after your death. This meant couples could make retirement decisions around a relatively stable income base.”
But couples with DC pensions now need to think much more closely about how and when they each access their respective pots. This shift, Oxlade says, means retirement timing has become more of a “household strategy decision” than a “fixed retirement event”.
Prioritisation is a key factor. Sue Allen, head of financial planning at Chester Rose, says: “One of the most common retirement planning discussions we have with couples is deciding who retires first. While many people assume they will retire together, in reality, retirement is often staggered. Either by choice, or necessity.”
Before you make any decisions, there are five issues worth considering.
Lucie Spencer, from the Society of Later Life Advisers and a financial planner at Evelyn Partners, points out that it’s often health or the need to devote time to looking after someone else, that drives the decision.
She says a question that needs asking is: “Does one partner have a medical reason which means they should look at retiring early, or a caring responsibility for elderly parents or grandchildren?”
Spencer adds that her firm is increasingly seeing members of the so-called ‘sandwich generation’ coming up against the costs of both supporting their own children and caring for elderly parents.
Following the introduction of the pension freedoms in 2015, which gave DC pension holders more choice as to how they manage their retirement income, Andrew Oxlade suggests that it’s also important to think about the overall sustainability of your savings.
He says: “Couples now need to decide whether the investments they have built up are sufficient and how many years of retirement those assets may need to support.
“They must also decide whether to keep money invested and draw an income gradually, or secure a guaranteed income through an annuity.”
A key part of this will be thinking about how much income you’ll need, says Chester Rose’s Sue Allen. “Understanding what you spend today, what you are likely to spend in retirement and where that income will come from is essential.”
This will help you work out whether you can afford to retire together or whether it might make sense for one of you to keep working.
You will also need to think about the normal minimum pension age (NMPA) – the earliest you can usually access a personal or workplace pension. Andrew Tully, a director at Nucleus, warns that this could be an obstacle if either of you is still relatively young. “The NMPA is currently 55 but rising to 57 from 2028. So, a younger person may not have ability to access their pension, even if they wanted to.”
Couples in the run-up to retirement should also think about who has the most earning potential over the next few years, as well as the ability to carry on building a bigger pension pot.
Lucie Spencer says: “It is often the partner with the lesser earning potential, and the lesser pension provision, who decides to step away from the working world first.”
It’s also worth thinking about your financial commitments, says Sue Allen. Especially in terms of the support that you may, or may not, want to offer your children. “Mortgage payments, helping children onto the property ladder and school fees can all influence retirement timing.”
Timing retirement could be even more complicated if you’re not the same age as your partner, especially if you want to stop working at the same time.
Oxlade says: “Age gaps and discussions around retirement timing can lead to some lively debate between couples. It’s something that many people struggle to navigate.
"It can feel logical to retire together but, if the age gap is five years or more, there may be both technical and emotional barriers. These include differences in pension access ages, questions around fairness, and difficult conversations about health, longevity and healthy life expectancy.”
If you’re in your mid-60s, say, and have a spouse who is still in their 50s, they may not feel quite as ready to wind down as you.
Andrew Tully also points out that declining health is unlikely to happen simultaneously when there’s an age gap. “The older partner may face significant healthcare or long-term care costs while the younger partner is still physically active and wishing to travel.”
However, even if you had planned to retire together, staggering the process may ease the financial pressure on you. Andrew Oxlade explains: “On the upside, pension withdrawals for the older partner could potentially be reduced while the younger partner continues earning.
"This can help preserve pension assets for later life or allow higher income withdrawals when they are genuinely needed. A younger surviving spouse may also need retirement assets to last significantly longer, making long-term planning particularly important.”
And, if one of you does decide to remain in work a little bit longer, you may also be able to keep some of the additional perks that come with it. For example, Tully says: “The working spouse may be able to maintain employer-sponsored health insurance covering them and their spouse.”
While your finances are, naturally, an important part of the jigsaw, your plans shouldn’t be entirely dictated by spreadsheets.
Oxlade says: “Couples should discuss what sort of retirement they actually want. The old convention of a complete stop from work is becoming less common. There is growing recognition that work can provide purpose, routine, and social interaction.”
For many people, this is where professional advice can help. A financial planner can use cashflow modelling to help you plan your income across a range of different scenarios. For example, retiring together or one of you working for a while longer.
And, if you’re struggling to reach agreement, they may also be able to help you reach a compromise or suggest alternative solutions that you hadn’t considered.
Oxlade adds: “The key issue is making sure expectations are openly discussed. Problems often arise when couples assume they both want the same version of retirement. The most successful outcomes usually come when couples treat retirement as a shared long-term strategy rather than two separate individual decisions.”
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