3 surprising ways that being single could affect your financial plan
Many financial planning solutions are geared towards couples – so how does being single affect your financial plan? Read 3 key ways, plus how we can help
We often talk about financial planning for couples in our news articles – but in fact, many people approaching retirement are not married or partnered.
Indeed, the Office for National Statistics (ONS) reports that as of 2022, in England there were more than 2.5 million people between the ages of 45 and 64 who had never been married and remained single. For those aged 65 and above, single individuals numbered around 700,000.
What’s more, there are plenty of circumstances around which you could find yourself single at a later stage in your life, such as being widowed or going through a divorce.
As such, it’s important to note that if you are single and/or have no children, your financial plan may look different to that of your married or cohabiting peers.
With this in mind, let’s take a look at three aspects of your financial plan that you may wish to pay attention to if you’re single, plus how a Kellands financial planner could ensure your unique wealth needs are met.
- You may need a bigger pot of retirement savings
Single people may need around £43,000 a year to achieve a comfortable retirement, the Pensions and Lifetime Savings Association (PLSA) reports. This means that over a 30-year retirement, you could need pension savings that equal around £1.3 million.
Yet the PLSA’s research found that between them, a retired couple may need £59,000 a year to achieve the same standard of living – around £1.8 million over 30 years.
This brings up a crucial point that many overlook: as a single person, your expenses do not usually equal half of those who are married or cohabiting. Your essential outgoings may make up between two-thirds and three-quarters of married couples’ expenses, meaning that you may need to save more than someone who’s married in order to retire comfortably.
If you’re approaching retirement as a single person, or if you are in a relationship but do not live with your partner, take the time to think about:
- Whether you can afford the retirement you want over the long term
- How your current savings and investments match up to your retirement goals
- How much more you might need to save before you retire, taking later-life costs like nursing care into account.
In simple terms, if you’re single, it falls upon you alone to fund your retirement.
And, if you consider the possibility of needing costly later-life care, this could be even more likely if you’re single, as you may not benefit from the care many receive from their spouses or partners in old age.
That’s why working with a Kellands financial planner could be so crucial if you’re single and on the road to retirement.
We can help you ensure your plan is on track, making sure that you’re fully equipped to draw a sustainable income and meet your own needs when you stop work.
- You could require a more robust package of protection
Financial protection – such as life insurance, critical illness cover, and income protection – is an essential facet of any financial plan, no matter your marital status.
Without any protection in place, you or your family could face unprecedented financial hardship if an unexpected event happened, including a death, serious illness, or life-changing injury.
As an example, UK insurer Aviva reports that as of 2022, the average cost of having cancer was around £891 a month. These costs might include the impact of not being able to work, the cost of travelling to hospital appointments, and paying for additional support with basic tasks like cooking and cleaning.
This is just one example of how your savings could be depleted if you became ill or injured without protection in place.
As a single person, ensuring your money is protected against these kinds of shocks is all the more necessary.
Unprotected couples may be able to draw from two pots of savings and investments if the worst happened – and they’re more likely to inherit each other’s wealth when one passes away.
But if you’re single and you become critically ill or injured, this event could have a serious impact on your financial stability. Plus, you may not be able to rely on inheriting a spouse or partner’s money, or receiving their life insurance payout, when they pass away.
Speaking of which, having life insurance in place is essential for single people, even though many assume it isn’t necessary.
For example, if you have beneficiaries who would inherit your home upon your death, a life cover payout could help them to keep paying the mortgage and other bills, rather than them needing to sell the home right away.
Plus, your loved ones could more easily cover funeral costs and an Inheritance Tax (IHT) bill if you had life cover in place when you passed away.
You’ll find out more about estate planning for single people in the next section – but the bottom line is that a bespoke package of protection could be an important lifeline for single individuals.
- Your estate plan might look different to that of your married peers
As you get older, if you are not married or do not have children, you might start to think more carefully about who will inherit your estate when you pass away.
If you are single and do not have children
Estate planning in this case is an important consideration for several reasons, perhaps the most pertinent of which is that the Inheritance Tax (IHT) rules differ for those passing wealth to someone other than “direct descendants”.
As you may have read in a previous article, the “nil-rate bands” are tax-free thresholds under which those inheriting an estate pay no IHT.
In the 2024/25 tax year, and fixed until 2028, there are two nil-rate bands. There is a standard nil-rate band of £325,000, and the additional residence nil-rate band of £175,000 given to those passing property on to their children, grandchildren, or great-grandchildren.
This means that if you’re leaving your home or other properties to your siblings, nieces, nephews, or anyone else, you won’t benefit from the residence nil-rate band.
So, as of the 2024/25 tax year, you could only leave up to £325,000 – including property – IHT-free, rather than the full £500,000 as those with children can.
What’s more, it could help to remember that a person inheriting their spouse’s estate does not usually pay IHT. But if you are in an unmarried relationship, even if you live together, this exemption does not apply.
If you are single and have children
As a single person with children, the good news is that they will likely benefit from both nil-rate bands, allowing you to pass wealth down more tax-efficiently than childless individuals.
However, it is still crucial to consider that when you pass away, your adult children will be responsible for handling your affairs. As such, you may wish to ensure that your estate plan is clear-cut, fair, and considers your children’s potential IHT bill.
If your children are still under the age of 18, it is also highly important that you provide stipulations for their guardianship as a single parent.
These factors stress the importance of the following actions for single and/or childless individuals:
- Writing a will and letter of wishes
- Registering a financial Lasting Power of Attorney (LPA), which gives a trusted individual the power to handle your finances if you lose mental capacity or need help with managing money
- Forming an IHT strategy that is tailored to your specific circumstances
- Talking to an expert about creating a financial plan that is suited to your needs.
While many people believe that rigorous estate planning is only necessary for the average nuclear family, single individuals’ estate plans are just as important and perhaps even more in need of professional guidance.
Your Kellands financial planner could offer you a bespoke financial plan
Although many foundational elements of financial planning can be applied across the board, there is no such thing as an off-the-shelf financial plan that works for everyone.
No matter what stage of life you’re in, your family circumstances, or your goals, we’re here to tailor your plan according to what you want and need.
If you’re single, widowed, do not have children, or are in any other circumstances that do not fit the “standard model”, a Kellands financial planner could help you plan for the future by:
- Assessing your wealth circumstances as they stand today
- Ensuring you’re properly protected against financial shocks
- Using cashflow modelling software to project different scenarios for your future
- Exploring investment and savings options that suit your appetite for risk
- Guiding you through the estate planning process
- Creating a bespoke financial plan that puts you on track to achieve your goals.
To find out more about financial planning that puts your goals first, email us at hale@kelland.co.uk, or call 0161 929 8838, to speak to a financial planner.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate estate planning, cashflow planning, tax planning, Lasting Powers of Attorney, or will writing.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Note that life insurance plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.
Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.