How to manage imbalance in husband/wife pension?

a_silver_lining

I understand where you are coming from OP.

I bought my flat alone and have 100k plus equity. My partner and I have been together for almost 5 years, we are early 30's. In a few years I will sell up and we will buy together. We've already discussed the unequal split there will be in the property.

Initially I was ok with just owning a bigger proportion, but my partner is in a profession with a good pension and I don't think it would be fair to be sat in 30 years unable to spend the extra equity I will hold. Our solution is an agreement that she will pay a larger proportion of the mortgage, so by the end of the term we hold 50-50 shares. I can then save the money I would have paid to the mortgage towards retirement.

You are both too late to alter it the way we planned, so I would imagine you will need to sell and rebuy to be 50-50 in ownership. This would release your additional money so you can use this to top up your pension.

As you have done a similar split in finances to us, and anticipate your equity going to your children I personally don't think it would be fair to ask him to give you some of his pension to subsidise your living just so you can hold onto your equity.

DairyQueen

As has been mentioned, the OP has posted on a board specific to relationships and not to finance. So, is this a financial issue? or a relationship issue? or a moral issue? or a philosophical issue?

The OP has stated that it's both a financial and moral (fairness/independence) issue. However, the moral seems to trump the financial as the OP wishes to prioritise their jointly held opinion of what constitutes fairness/independence over the best interests of the couple as a unit. My response is therefore framed with that in mind.

Given that the OP and spouse would forego any financial benefit of marital unity if it compromised their principle of 50/50 expense split, and given that they have a long-standing arrangement of ring-fencing their assets for individual ownership/use, then these principles hold regardless of what fate throws at each of them. Presumably OP would not be sharing a lottery win with spouse so, likewise, she is not expecting spouse to take the hit when her luck runs in the other direction.

1) I assume that OP's pensions are either small DB or DC, or a mixture of the two? The DB pension will probably offer the standard 50% widow/er's pension. If spouse has a generous DB pension the same thing applies. Immediately, this 50/50 principle is therefore breached as OP stands to gain much more if spouse dies first than he will if he outlives her. Regardless of OP's principles our cultural norms operate on the basis of marriage as a legal and financial union. Only she will be able to receive the widow's pension as he can't nominate an alternate beneficiary.

2) Will OP be entitled to the full nSP. Will her spouse? How old are each of the parties? Have both received state pension forecasts? These issues are important for retirement planning and especially if OP will not be making any more NI contributions, or receiving NI credits.

3) The principle of 50/50 expenses has been breached for the duration of the marriage as OP has always subsidised spouse's housing. OP should have been receiving rent on the 32% of their home that she owns but on which he has received the benefit. If he considers it 'her house' then he should be paying for the use of her asset. Or was this a generous gift? It isn't stated what the rental income would be but, had spouse paid his 'fair' share of his housing costs across this years then OP would have been able to invest that money for retirement. Increased in line with rental prices, and compounded, that could potentially represent a fair chunk of dosh.

4) As the housing cost was never equitably split it therefore seems fair that spouse should now repay his 'debt' and compensate OP for her previous 'loss'. Not only that, he should immediately begin paying her a third of the market rent as he is still receiving that benefit.

5) OP has no moral claim on any of spouse's pension as a means of support but she has a moral claim on his use of the percentage of the house that he doesn't own.

I think OP and spouse would benefit from a retirement plan that includes him paying her rent until such time as he owns an equal share of a house of which he owns 18% but has 50% use. At that point his obligation to pay rent ceases.

What happens when the first of them dies? Will they each be willed a lifetime interest in the other's share of the house?, or will the survivor have their home sold out from under them in order to pay the deceased's beneficiaries?

What happens if one/both require residential care? What happens if OP needs in-home care? The LA will not respect OP's principle of financial independence and spouse's income will be taken into account in any means-test. His income will therefore be expected to pay for/subsidise these kinds of costs.

OP is welcome to seek opinion on the Pensions board. However, the regulars there (of which I am one) focus on maximising household income in retirement. OP's principles are contrarian to that objective so likely to receive a rather bemused response (at best).

OP: I wish you luck but I'm glad I don't share your views.

moneyistooshorttomention

Tom99 wrote: »

I read it the other way round OP happy to part with equity buy he won't buy in. He wants to occupy 50% of house but only pay for 18%. I think its the rent on the 32% which needs thinking about.

That's how I've read it.

The only way he can keep his finances totally separate still is to accept that an EA says what rent the house would fetch on the open market and he then pays 32% of that to OP.

That would solve things from here on in - ie as to him paying his way fairly (which he isn't at present - because he owns so much less of the house - but is indeed getting 50% of the use of it).

Which leaves the question of the fact he has benefitted from being let off that 32% of the rent for the x number of years since he moved in - and I'm not clear what can be done about that - but he "does owe OP one on that".

I would be aware if a man moved out of rented accommodation into my home with me that I would be saving him money from that and wonder how that could be "worked out" fairly. Though, admitted, I'd envisage I'd have my house and he'd have his house and neither of us would pay towards the others house (we'd just live in his presumably and use mine as our holiday home).

EDIT; Diary Queen is giving the practical advice that was actually asked for - and I would agree that this thread was going to get the "wrong" set of responses (ie an emotional set - rather than a practical set) on this particular sub-forum.

chattykathyblue

Hi Debra

I totally get your situation. I have taken my modest occupational pension and for now do a bit of independent work which will end in July. My husband will retire next year with a big pension pot which he will dip into as and when needed. At the moment we split the bills and then have our own 'spends'. For the future, we have decided that we will use the big pension pot for holidays and large outgoings such new cars etc as I won't have any 'pot' or savings to dip into. Can you have a discussion with your DH along those lines? You just need to be honest and explain your worries. Good luck!

amanita

Hey,

Just a small detail I noticed- be careful I assuming your 'pre-nup' will provide any protection in the event of divorce/your death. They are unenforceable and legally void in the UK.

Chris

WillowCat

amanita wrote: »

Hey,

Just a small detail I noticed- be careful I assuming your 'pre-nup' will provide any protection in the event of divorce/your death. They are unenforceable and legally void in the UK.

Chris

On the contrary, it would be a brave court that didn't uphold the precedent set by the Supreme Court in Radmacher vs Granatino.

There are some get outs, such as not taking to consideration the needs of dependent children, necessity of full disclosure prior to the making of the agreement, no undue pressure, unforseen changes of circumstances, not understanding of the agreement etc, but if one party seeks to resile from the agreement it can be taken through court and upheld. The chances of it being upheld are enhanced if legal advice is taken before the signing (as this can prove the parties understand it and there is no undue pressure etc), but this is not strictly necessary.

It cost my ex over £20k to take me to court to try and resile from ours (which actually was a DIY agreement but in retrospect I don't recommend that!) Seven court hearings later I won and he got nothing more than he already had under the agreement. Fortunately I represented myself so only had minimal costs. The judge said he'd been vindictive in bringing the case when we had a clear agreement.