In this week’s personal finance edition of Merryn Talks Money, hosts Merryn Somerset Webb and John Stepek answer the question: what are the financial benefits of getting married in the UK?
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Bloomberg Audio Studios, Podcasts, Radio News. Welcome to MEREN talks your Money. The personal finance edision of MEREN talks money. In these bonus podcasts, we talk about the best strategies for making the most of your money. Him Arin Sumset Web and with Me Senior reporter and Money to stilled off A. John Stapbeck, Hi, John, Hi, mil Okay, So, this week we're answering a verious personal question because it comes from one of our very own producers, Moses. What's on your mind this week about your money?
All right? All right, I'll tell you, maren. So, I've been with my girlfriend for just over eight years. We are very committed to each other and don't plan on breaking up, but we question whether it's worth getting married or whether we should just keep things as they are now. We are renting a place at the moment and plan to eventually buy a place at some point in the future, but putting the romance of it all to one side, we're curious on what the practical benefits are of getting married.
Okay, all right, interesting, I mean I'm mentioned at the very beginning. Am I allowed to ask you a question back before we start?
Yes?
Absolutely, I say, when you say we're questioning whether it's worth getting married, well, you know, I mean clearly you're not just talking about financial benefits. What do you mean by worth?
Well, the way that we see it is that at the moment, we know that we want to be together for a very very long time. But getting married it seems like a lot of fuss, right, the whole wedding and like then having to like potentially like change names, all that sort of stuff. But is there like an actual, like practical benefit to it?
All right? The first thing I would say is it doesn't have to be difficult. Registry office, keep your own names, okay, ten minutes done, dusted, Yeah, all good? So you know it could be could be really really easy. Don't need to have a twenty thousand pound wedding two hundred people? Yes, okay, So bearing that in mind, can we make it worth it for you if we assume you're only going to have a quick ten minute wedding at the registree office, No big dinner, no champagne, nothing, ten minutes in our job done.
I'm very open to it.
Okay, I'm very open to it. Excellent, right, John, are you an expert here?
I'm not.
John's married, by the way, so he's automatically an expert.
Yeah, I I did see one thing I identify with, and I actually think a lot of men certainly I don't feel like I can speak form, but certainly for men I've talked to, the idea of being married was always quite attractive. For maybe the idea of actually getting married was a bit of our pain in the backseat. Because it is all very well seeing registry office do what you want to do. One of the marriage is that it involves a wider group of people than just you a lot of the time. So it depends on how your relationships are with various other parts of your family as to how happy they might be or might not be with the wedding that you want as opposed to the wedding that they wish you would have.
This is this is not that kind of podcast.
You've got to think about the emotional sides of all of these things. When it comes to finance. You know, I'm always gibbering about investment psychology of marriage psychologists.
What you're telling me here, John, is that lots of men don't want to get married because admin and in laws.
Basically yes, necessarily in laws. It might be their own families as well. But other than that, inheritance tax is probably the biggest, most obvious factor.
I think we should start with the little ones. Yeah, and let's start with the little bits. Okay. The first one is there is actually a marriage tax allowance. There is a tiny little financial benefit to getting married if one of you is not using up their full income tax allowance. So you have to have one person who is not an income taxpayer and one person who is an income taxpayer, and the non payer can transfer part of their personal allowance, their personal income tax allowance to the taxpayer. They can transfer a maximum ten percent of the allowance, which means that there will be one two hundred and sixty pounds that goes tax free that wouldn't have been tax free otherwise, saving you a massive two hundred and fifty two pounds a year. Are we done here, Moses, I do it for you? Not enough? Not enough?
Well, there's one small problem in that your spouse has to be a basic tax payer as well. Yes, so if the forty PA, then that's that's the window. Yes, that's one benefit.
The next thing that I think is attractive about this and this again will only apply to a small number of people. Is that you can inherit a defined benefit pension, right, And we always talk about how wonderful defined benefit pensions are. But a lot of defined benefit pensions, not all, but I say the majority come with the ability for the surviving spouse, and they do it here to the word spouse pretty carefully. I don't think you can nominate anyone else. And if you aren't married on the death, then it's generally not inheritable. Remember that a pension is is controlled by the trustees as opposed to by you yourself, and this in this kind of case, but in the main, if you're married, you will usually get mostly fifty percent I think it is these days, sometimes two thirds of a dB pension. Now, not very many people have dB pensions anymore. But if you happen to have one, and you would like your partner to inherit some of it on your death and getting married is a really good idea. Now that's a big money one. Most as I don't think you have a dB pension, But.
Yeah, no I don't. But I'm pretty sure that my partner is already assigned as being the recipient of my pension if anything happens to me anyway.
Sorry, that's a defined contribution. Let's say that you had a defined benefit pension, one of those wonderful ones that John and I would like to have, that comes automatically every month, inflation linked, et cetera, et cetera. You don't have to do anything. The problem is that problem, not your problem. Very nice. If you were not married, that would die with you. If you were married, your lucky wife would get a large percentage of it.
Okay, that's nicee right, that is great.
This is not one for you, but maybe maybe one for some other people. What next the way, John.
Sorry, they've been including several partnerships here, so it's several partners and married. I've got the same rules in case anyone's confused about that.
And I would like to add something to that, by the way, which is, there is no such thing as a common law marriage. If you do not actually get around getting married and doing the admin for getting married, or you are not married, there is no such thing as a common oalpartnership that gives you the same rights as being married. It's a myth that will not go away.
And I mean that's really important because so many people think that that the rules are slightly more complicated in Scotland. But even then it's not that complicated. It's basically the same. And if you want to get if you like, I think it's a cohabitation agreement. But even then, the amount the admin you need to do to get a cohabitation agreement, you might as well just go and get married, you know, I would suggest, but looking at it, but yeah, that's really important. Just because you've lived together for xt number of years doesn't mean that your spouse, so you're not your spouse is not entasled. And if you are living together, make sure if you own a properly then it should be owned jointly. If you are in a relationship in your name is not on the mortgage, then make sure you'll find out why that is and get to own the mortgage or you know, get led to the person.
All right, thank you, John. Back to marriage, So we're not getting rid of people here, not where we're going, right, So an awful lot of this, I'm afraid, and awful lot of the benefits of being married are about death. So sorry, yes, but I want to move on to isis so you can inherit an iso from your from your spouse, so when they die, their ISA comes to you inside the wrapper, you inherit the rapper itself. So what it ends up with is you end up with a with a second allowance in the year of your spouse is deaf. Do you get your own twenty thousand allowance and then there is transferred over to you. So that's nice. That's a good one.
That is good.
John's looking doubtful about that. Do you think I've got that wrong? John?
No, No, I think you know you're absolutely. I'm just thinking, yes, that is when that's what I hadn't thought.
Okay, So I think that's that's a very good one. It's definitely a reason to get married. Inheriting and is isost the perfect investment rapper. The other ones are really again about the transfer of allowances. We'll come back to death in a minute. We'll come back to i T. John is athlete itching to talk about IHT. There's also the transfer of capital gains allowances. Right, So there's no capital gains when you transfer something from yourself to your spouse. If you transfer something to somebody else, you have to pay capital gains on the transfer. But between you and this is even before you're dead. You can transfer that allowance around. So if you have something that you want to sell and it's going to use all of your capital gains allowance, you can transfer some of it to your spouse and then they can sell that bit and use capital gains allowance as well. So that's a particularly useful one. Not the capital gains allowances are quite what they used to be, but nonetheless that is a useful advantage to being married. I can see most is really getting into this. You're nearly over the line, aren't you.
Hey, I'm there, Yeah, I'm almost sold.
It's all about the tax efficiency.
All about tax ficiency, all right, John, iht.
Yeah, I mean inheritance tax is just so everyone's got a three hundred and twenty five thousand pounds inheritance tax allowance, and if you're married and you die, everything goes over to your spouse, and that includes your allowance, so you don't have to do anything you'd have to do any admin. You don't even have to have a will. You should have a will, but if you don't, then they'll still get your allowance. And so that means that the autu might live six hundred and fifty pounds they can pass on. And if you've got a family home worth you know, at least three hundred and fifty pounds, then that's a million pounds in total you can pass it on. If you're not married, then you're gonna have to a you're gonna have to write a will to make sure that you use up your HT allowance when you die, otherwise it will it will die with you. And then your spouse doesn't doesn't automatically in orth not your spouse, you're the person you're living with, doesn't inherit your allowance, And so basically we can.
Call that, we can call the person who isn't the spouse the non spouse. For the person.
The non spouse. Yeah, so yeah, the non spouse doesn't automatically inherit any of your allowances. And so basically you're back to ay, You're back to a massive ADMIN nightmare. And there is also the you know, that's the fact that obviously life is uncertain, you don't know what's going to happen, and a lot of the time you get one of the reasons that things like the spousal allowance eventually was you know, automatically transferred. Was because you go all of these kind of somewhat tragic stories about people who died unexpectedly and then their partners left for a nightmare or kicked out of their house because they have an ict A liability there they shouldn't have had if they were better organized. The problem is if you're not married, you can end up in that position. So that's that is one very good reason to get married, and it gets ten times worse if you get kids, because if you get kids and again you're not on top of your ADMIN and you aren't married, then the situation when you die is much more complicated than if you are married.
And it's different in Scotland and England right because this day state has different ways of dividing up you appropriate if you.
Yeah, then ness to see laws are different. Don't know the exact details of how they're different, but it's still the point is it's like you, if you don't want the person you've had kids wait to be left high and dry in the event is something bad happening, you either need to make sure that you cross every t and do every eye sharpish, or you can get married. And there's an element of protection from that even if the WATS does happen.
Yeah, right, So that's that actually, which I think is an excellent reason to get married. But I want to go briefly back to your earlier thing you mentioned earlier. It's about an expression of wishes on your pension. So most of us have a DC pension, a defined contribution. If we talk about this too much, I don't know, No, talk about pensions too much, isn't it with a DC. With a DC pension, you need to make it clear who you want the money to go to on your deaths. You need to fill in that. All any pension bride will have a form. You fill it in with your expression of wishes. And it's not that I mean, this is the interesting thing. It's an expression of wishes because legally it's not your decision to make because the pension funds are controlled by the pension trustees. But again, if you make that expression of which it wishes, it would be very bizarre for that not to happen. So make sure you do that on your DC.
Yeah, And I mean, the other interesting with pensions is that it takes quite a long time for the process after someone dies because of learned from experience, for to then get passed on to their partner or it can do so. It definitely makes sure that the wishes are very very clear, because you want that ad meant to go as smoothly as it possibly can, and certainly in my experience, pension providers are not the fastest dealing with stuff.
No, I can't think why the other reason to get married? It's all these endless studies showing you that married people are happier than people who are not married. Do you buy that, John, you look pretty happy. John's a happy guy. I'm happy.
Yeah. I mean, assuming you've got a happy marriage. I always say, I say a lot of these these studies with a pinch of salts. I don't see how they can control. For the other fact, you know, there's got to be an element of self selection, and they have been. They approach people road speaking.
Yeah, it might the happiness just being finding someone you want to be married to.
I think it's more the couples that end up taking part in these studies are probably basically quite happy and not not wildly dysfunctional. You think they say that some people in bad marriages. Other than that.
They don't ask divorce people do they.
Well, yeah, exactly, it's a survivorship bias school, that is, it.
Is a massive survivorship bias. Okay, so there we go. Don't get married. It will make you happy. The act of getting married in itself will not make you happy. There are some other factors doing good that do get married to avoid ADMIN and transfer your tax allowances around the place. Does that something's up?
Yeah? And also that will make you happier not having to do as much admin.
Yeah, any admin, you don't have to do it automatic. Joy. So Moses, when do the invitations arrived? John? And I? Already we're free for the next months or so?
Right, really, okay, excellent, excellent? All right, Well I'll be passing by Patt and Garden on the way home, and yeah, my mind has changed. But no, I'm not sure that actually, like being married would make me any happier, because I don't think it would because I feel like, like I I already live a life in which I'm basically married, Because like, I feel like if someone wants to leave you, they can leave you anyway. And then I'm not sure that that like a piece of paper would really stop them. However, I do think that I do think that everything to do with the financial side of things. Should I pass away and leave her, then I think, yeah, that's actually like super important because statistically speaking, I probably will pass away before her, and if we do have kids, I don't want to want for her to experience any extra stress of sorting out all of the ADMIN and the paperwork, Like it's not worth it.
And we can sell people anything come with John by telling them there's less ADMIN. It is. Actually it's quite a lot harder to leave somebody if you're married to them, because divorce is piled of ADMIN so much. Again, and so if we want to avoid ADMIN, get married, stay married. And that's the message from this podcast, which seems to be changing its focus slightly. Well, straight back to Pure Finance next week. Thanks for listening to this week's Marry and Talk to Your Money. If you like us show, rate, review, and subscribe wherever you listen to podcasts. Also be sure to follow me and John on ex or Twitter at marrynus W and John Underscore Steppic. This episode was produced by some SIDI production support from Moses and Thank You Moses. Sound designed by Blake Maples. Questions and comments on this show and all our shows. Always welcome. Our show email is Merin Money at Bloomberg dot net. Want to listen to episodes of Merin Talks Money ad free. Become a Bloomberg dot com subscriber today. Check out our special intro offer right now at bloomberg dot com Forward Slash Podcast Offer or click the link in the show notes. You'll also unlock deep reporting data and analysis from reporters around the world. If you're already at bloomberg dot com subscriber, connect your account with Apple Podcasts to listen to this episode ad free.