Why you shouldn’t rely on your partner’s pension

Don’t assume that you get to have a share in your partner’s pension when you retire. It’s always best to ensure your own financial independence when you reach your golden years.

If your partner has built up a sizeable nest egg for his or her golden years, you may assume that this is something you’ll be able to share in when you retire.

According to UK investment platform Hargreaves Lansdown, nearly a quarter (23%) of men and almost 40% (39%) of women said that they planned on relying on their spouse’s pension in retirement.

But there are several reasons why you shouldn’t rely on your partner’s nest egg to support you in your golden years.

Uncertain relationships and uncertain financial futures

While your partner’s retirement finances may look healthy now, it’s not a good idea to rely on this as things could easily change. Changes can include things like markets crashing, bad investment choices, or else your partner’s pension payments may not be enough to cover expenses later in life.

‘By starting to plan for your retirement early in your working life, you can maintain your standard of living in your retirement years.

‘While a life partner can be wonderful, they should not be considered as a part of your retirement plan as they may not even have saved sufficiently to meet their own requirements,’ points out Buhle Langa, certified financial planner at Alexander Forbes.

Dealing with divorce

While it’s unromantic to consider that you won’t be a part of each other’s lives when you become older, the sad fact is that many marriages end in divorce and more couples are splitting up later in life. According to one report, nearly one in five (17.6%) marriages in South Africa end up in divorce.

There’s also no guarantee that you will have a claim on your partner’s retirement funds in the event of a divorce.

If you’re married through an accrual system, for instance, your partner may have excluded retirement funds from the accrual. If you are cohabiting with your partner, you also don’t have a right to claim on their pension in the event of a split unless you enter into a domestic partnership agreement.

Dealing with death

Divorce may not be the only reason why you may lose out on access to your partner’s pension later in life. ‘Women tend to live longer than men, and since research shows that they generally earn less, this means that they need to save more, for longer, than their male counterparts,’ says Langa.

And even if you do have the right to claim on your partner’s pension, it may not be enough to cover you later in life – yet another reason to ensure that you have your own finances to rely on too.

Plan ahead

So, what can you do to ensure that you’re not relying on your partner’s pension in your retirement? It’s crucial to take steps now to ensure that you’re financially independent going forward. This would mean that whatever happens (death, divorce or otherwise), you are sorted financially.

If you haven’t started any retirement savings, start now – it’s never too late. ‘Having sufficient planning in place for both parties is always advisable, and each party should have their own savings and investments. A tax-free savings account is a great place to start, allowing you to save up to R36,000 a year without paying tax on the growth,’ says Langa.

If you do have some retirement savings set up, make sure that they are adequately topped up to meet your retirement needs.

‘Increasing your contributions to your retirement fund at work will help you accumulate larger savings for your retirement. To take advantage of the benefits of compound interest and avoid a hefty tax liability, it is also advisable to keep your retirement savings invested when changing jobs,’ advises Langa.