Kiss and wise up

ALTHOUGH relationships are becoming more precarious, fi-nancial commitments like mortgages, pensions and savings seem to work on the notion that true love lasts forever.

It may sound less than romantic, but when you start living with someone you could save yourself a lot of trouble further down the line by facing up to a number of financial questions. This is particularly true for unmarried couples, who have little legal protection.

Philippa Gee, managing director of Gee & Company, a firm of independent financial advisers, says a practical approach to money can be a sign of a healthy relationship. "I have found with my clients that couples who are more realistic are more likely to stay together. Those who don't want to talk about money and simply put everything into joint names may have trouble communicating about other things."

Obviously circumstances will differ according to the couple, in particular if one earns more than the other. Take savings. If you are a 40 per cent rate taxpayer but your loved one isn't, it may appear sensible to put savings in his or her name to save tax. But it may not seem so clever if you later split up and cannot get access to your own money. Ms Gee says many couples like to keep separate bank accounts, at least for part of their money, so they are free to shop without crawling to their partner for permission. If you do have joint accounts, it is essential both of you see the statements and can check what goes in and comes out, she says.

She adds that savings and investment products such as PEPs, Tessas and the individual savings accounts due to be launched next April cause fewer problems because they can only be in one person's name.

Couples must tread carefully when dealing with their biggest joint financial commitment, the mortgage. If you are unmarried, buy together and pay similar amounts then the property should be under both names. However, if one of you has paid a disproportionate amount, Ms Gee says you should reflect this in the agreement.

If you own a flat and your partner moves in but only contributes to the bills then ownership may not be an issue, but if your partner starts paying towards the mortgage then he or she deserves a share of the property value, and this should be written into the agreement.

Couples sharing a PEP mortgage have to take out two separate PEPs as they cannot be in joint names. If this is the case, Ms Gee says, you should ask for a copy of your partner's PEP account. This may seem petty but remember that you are jointly liable for the mortgage, so if your partner fails to pay the premiums, you could suffer. This is a general rule worth noting: you are liable for anything in a joint name.

If you have an endowment mortgage it may be better to take out two endowments for pounds 40,000 rather than a joint one for pounds 80,000. Should you go your separate ways then you are both free to decide whether to continue with your policy or sell. You will pay two sets of policy fees but you could save a lot of trouble.

Similarly, joint life insurance policies taken out when you buy your house may simplify matters at first but can prove far more difficult to unravel.

Since 1996, married women have been granted rights to their husband's pensions on divorce. However, the legislation does not extend to unmarried couples.

Marriage may not be for you, but research from Colonial, the pensions provider, suggests that up to 4.5 million women are putting their financial and pension benefits at risk because cohabiting leaves them with few rights to property or pension should the relationship end.

There is no such thing as a common-law spouse in England. Public-sector occupational pension schemes do not recognise non-marital relationships and only a handful of private schemes will do so.

Even if you return to work after having children and have your own pension, you stand to lose out, according to Jaqui Bamford, head of legal and public affairs at Colonial.

The average woman in the UK takes a career break of four years when having children, but this could wipe nearly a third of the value off her final pension, because the early years of pension saving have a great impact on the final pension.

A woman earning the national average female salary of pounds 15,500 a year, making personal pension contributions of 5 per cent of salary from age 20, but who has a four-year break between 28 and 32, will have a final fund of pounds 286,000 at 60, Colonial says. But without the break this fund would be pounds 100,000 bigger.

Everybody should make a will but it is even more important for unmarried couples, as without a will there is no guarantee your partner will inherit anything at all, no matter how long you may have lived together.

You should also consider what would happen if one of you falls ill. Can you survive on one salary? If not it may be worth taking out cover against sickness. An income protection policy (also known as permanent health insurance) will pay regular monthly benefits until you or your partner are well enough to start work again, or until retirement in cases of serious illness.

For a free guide to dividing pensions at divorce contact Colonial on 0800 828501.

Next week: finance for single people.