5 practical reasons your financial plan needs to be different if you are single

Kev Burns

Kev Burns

Private Client Adviser

As the old saying goes: “Sometimes, you have to stand alone to prove you can still stand.”

According to Office for National Statistics (ONS) figures, 8.3 million people in the UK lived alone in 2022 – that’s 13% of all British households.

While being single has lots of positive benefits, it can necessitate more planning and proactive decision-making. This is particularly true when it comes to your finances.

Finding yourself single may be through choice, or it could occur at any point in life for a range of challenging reasons. So, to help you take control of your finances, here are five practical reasons you will need to think differently if you are single.

1. You may need to save more for retirement

As a single person, you will know that you don’t benefit from the “economies of scale” of being part of a couple.

Your expenses will amount to more than half of the cost of being in a couple as there will be fixed costs you will need to pay. That’s as true in retirement as it is during your working life.

A recent report in FTAdviser highlighted just how much more single people needed to save for retirement, compared to couples who are able to share costs.

For a comfortable living standard once you decided to make work optional – using the Pension and Lifetime Savings Association (PLSA) definition – single individuals would currently need to accumulate a pot of around £675,000.

Couples would need £835,000 between them to achieve the same lifestyle (around £418,000 each) meaning a single person would need to save an additional £257,000 to achieve the same lifestyle as a couple.

Working with a financial planner can help you live your life by design, on purpose. We can use sophisticated cashflow modelling software to illustrate at which age can you make work optional, and how sustainable your desired income is throughout your lifetime.

If your ideal lifestyle is not realistic, we can suggest imminent course corrections and guide you along the journey to ensure you are heading in the right direction.

2. You should make the most of tax allowances

Couples can benefit from doubling up on many tax allowances, from the Marriage Allowance to reliefs such as your Capital Gains Tax (CGT) annual exemption and limits on tax-efficient pension saving.

Hence, if you’re single, it is important that you make the most of the allowances available to you. These may include:

  • Using your annual Inheritance Tax (IHT) gifting allowance of £3,000, and other gifting exemptions such as “gifting from excess income” to reduce the value of your estate for IHT purposes.
  • Taking dividends up to your Dividend Allowance of £1,000 (falling to £500 in 2024/25)
  • Making the most of tax-efficient saving and investing by using your ISA allowance (£20,000 in 2023/24)
  • Crystallising gains up to your CGT annual exemption of £6,000 (falling to £3,000 in 2024/25)
  • Using tax-efficient investment vehicles such as Venture Capital Trusts (VCTs) and the Enterprise Investment Scheme (EIS) where appropriate.

Making the most of tax reliefs can help you to retain more of your wealth and make progress towards your financial goals.

3. You will need to think carefully about estate planning

If you’re married or in a civil partnership, writing a will might be easy if you simply want to leave your assets to your spouse or partner.

However, if you’re single, you’ll need to think more carefully about how you would like to distribute your wealth when you pass away.

For example, if you have not made a will, your assets will normally pass to your children under the rules of intestacy. If you have no children (and so no grandchildren) then the order in which relatives inherit your estate is:

  • Parents (if they are still alive)
  • Siblings
  • Half-siblings
  • Grandparents
  • Aunts and uncles
  • Half-aunts and uncles.

If none of the relatives mentioned above survive you, in England and Wales your estate is classed as “ownerless property” and passes to the Crown or, in Cornwall and Lancashire, to the relevant Duchy.
Making a will can ensure that your assets pass to your chosen beneficiaries on your death. This might include close friends, carers, or charities.

If you’re single, this is an important estate planning step – otherwise your property could end up in the hands of people you may not have chosen.

Additionally, being single can increase your chances of leaving an IHT issue.

Unlike widows or widowers, you are unable to benefit from the transferable IHT nil-rate band, and likewise, the additional residence nil-rate band will not benefit you if you have no direct descendants.

On death, all of your assets over the basic IHT nil-rate band (£325,000 in 2023/24) will likely be taxed at 40%, unless you leave them to an exempt beneficiary such as a UK-registered charity.

You will also need to consider who you want to make important decisions if you are unable to. If you were in hospital for an extended period, or you lose mental capacity, who could look after your personal finances or make decisions about your care?

Putting a Lasting Power of Attorney (LPA) in place can give you the peace of mind that you will have a trusted person (or persons) looking after your affairs.

4. You will need the right protection

If you are part of a couple and became ill and had to take an extended period off work, there is likely to be a second income to fall back on while you are recovering.

However, if you are single, you will need to continue to meet your financial commitments even if you are unable to work.

This makes financial protection a crucial part of your financial plan. Having the safety net of a capital or income injection when you really need it can help you maintain your lifestyle when life throws a curve ball.
The right protection – such as critical illness cover or income protection – can also help you to maintain important commitments such as regular savings or pension contributions, ensuring your future financial goals and objectives continue to be achievable.

5. You may need to focus more closely on your goals

In any partnership, there is often one person who takes on the responsibility for household finances – “they deal with the money!” is a familiar refrain.

If you’re single, you are already that person and it certainly does not come naturally for everyone.

As there is less room for error, you’ll need to focus on issues such as:

  • Locating your various pension pots and knowing if you are on track for making work optional.
  • Are you saving enough?
  • Do you have adequate protection? Or what is an adequate level of protection?
  • Are you paying the right amount of tax?

Seeking professional help can ease some of the stress of managing often complex financial issues.

Whether you’re single or in a committed relationship, we can carry out a full review of your financial plan, help you articulate goals that take money and planning to achieve, assess if your goals are achievable, and if not, suggest the best way to get you there.

To find out more about how a financial planner can provide valuable support, please get in touch. Contact us online, or call 020 7400 4700.

Please note

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment 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.

Enterprise Initiative Schemes (EIS) and Venture Capital Trusts (VCT) are higher-risk investments. They are typically suitable for UK-resident taxpayers who are able to tolerate increased levels of risk and are looking to invest for five years or more. Historical or current yields should not be considered a reliable indicator of future returns as they cannot be guaranteed.

Share values and income generated by the investments could go down as well as up, and you may get back less than you originally invested. These investments are highly illiquid, which means investors could find it difficult to, or be unable to, realise their shares at a value that’s close to the value of the underlying assets.
Tax levels and reliefs could change and the availability of tax reliefs will depend on individual circumstances.
The Financial Conduct Authority does not regulate cashflow planning, estate planning, tax planning or will writing.

Note that life insurance and critical illness cover 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.

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