A guide to LGBT+ personal finance

For most LGBT+ people, organising personal finances means saving enough for retirement, getting good value life and household insurance and managing money effectively on a monthly basis.

However, there are some areas where sorting out financial issues are more problematic – for example on the subject of wills and pension entitlements.

According to the Office for National Statistics, in 2018, just over 1.2 million (2.2%) of the UK population aged 16 and over identified themselves as lesbian, gay or bisexual (LGB).

The population aged 16 to 24 were the age group most likely to identify as LGB in 2018 (4.4%). More men (2.5%) than women (2.0%) identified themselves as LGB in 2018.

The statistics also showed that more than two thirds of the population (68.7%) who identified as LGB in 2018 were single, having never married or civil partnered. London had the largest proportion of the population who identified as LGB (2.8%). 

Yet financial companies have been slow to work with the community.

LGBT+ life and travel insurance

Life insurance used to be problematic, particularly for gay men. Thankfully financial discrimination is now illegal on the grounds of sex or sexual orientation, just as it is for race.

Searching the whole of the market will give you a wide range of competitive quotes. As with all insurance products, make sure you check the exclusions and terms and conditions before you sign up.

You don’t need to buy specific LGBT home or travel insurance. 

However, some extras may be useful. 

Emerald Life’s home insurance policy includes cover for hate crime or homophobia and optional legal expenses cover against discrimination. Its travel insurance policy covers foster, adopted and surrogate children.

LGBT+ pensions

Many pension policies allow you to nominate who you would like to benefit from your pension in the event of your death.

In 2017 the Supreme Court ruled that any discrimination on the basis of sexual orientation in pension provision is a breach of the EU Framework Directive and is therefore illegal under UK law.

It followed a legal challenge by retired businessman John Walker, 66, who argued that his pension scheme should provide the same pension rights upon his death for his husband as would have applied for a wife.

He challenged an exemption in the Equality Act that allows employers to exclude same sex civil partners and spouses from benefits paid into a pension fund before the Civil Partnership Act came into force in 2005.

However, pension schemes aren’t obliged to honour this if you are living with a partner in a less formal arrangement. 

If you don’t have a civil partnership then you will need to complete an “expression of wishes” form, which indicates who benefits are paid to, upon your death.

You should also check the scheme rules regarding whether dependent children can receive benefits from a pension scheme after you die.

LGBT+ estate planning

Having a civil partnership or marriage can protect your partner if you die. 

When you get married or enter a civil partnership you will need to rewrite your will as all previous wills won’t be valid.

Unfortunately, if you live together but aren’t married or in a civil partnership then your surviving partner may not be entitled to anything if you die without making a will (intestate). 

However, they may be able to apply for financial provision from the estate.

If you’re married or in a civil partnership and you separate from your partner but are not divorced, then they may still inherit your estate. If you are in this position and you want the money to go elsewhere then you will need to rewrite your will.

Next of kin refers to your nearest relative by blood or marriage. If you are in a civil partnership or married this should not be a problem, however, some organisations may not accept you and your partner are next of kin if you are just cohabiting.

State benefits for LGBT+ people

Same-sex couples who live together are now treated as a couple for benefit claims, whether you are living together, married or in a civil partnership. 

Your resources and requirements are jointly assessed.

If you are in a civil partnership, you may be able to claim bereavement benefit if your partner dies. You may also be eligible for a retirement pension based on a partner’s national insurance contributions.

If your relationship ends, you and your partner have a legal responsibility to support one another financially at the end of a marriage or civil partnership and to make provision for dependent children.

Specialist LBGT+ products

Are you better off with a traditional finance or insurance product rather than a white label product with extra branding and bells and whistles?

If you are looking at taking financial advice from an independent financial adviser, then an IFA who specialises in LGBT money management would be a good choice. 

They will be familiar with the legal and financial issues surrounding same-sex relationships and financial planning. They can also advise you on how to save for your retirement and invest in a way that reflects your lifestyle and life goals.

However, there are very few financial products that are LGBT branded, partly because this would be seen as discriminatory.

Virgin Money has a Rainbow credit card that is the same as all its other cards except that £1 is donated to Stonewall every time the card is used.

LGBT+ income tax, HMRC, and personal allowances

When you live together, each partner is taxed separately.

Each financial year you have a personal allowance which, for the 2020-2021 tax year, is £12,500. This is the amount of income earned that you do not have to pay tax on.

You may also be eligible for the Marriage Allowance. This enables a couple to transfer £1,250 of their personal allowance between them. However, you must be married or in a civil partnership, and one of you needs to be a non-taxpayer while the other is a basic rate taxpayer.

In addition, your Capital Gains Tax (CGT) allowance (worth £12,300 for an individual and £24,600 for a couple in 2020-21) is the amount of profit you can make from an asset in a tax year before any tax is payable. 

Married couples and civil partners can transfer assets between one another without incurring CGT. Other allowances, such as your personal savings allowance and ISA allowance, remain the same.

Trans personal finance

The legal status of civil partnership and marriage are the same for all same-sex couples, whether they are women or men.

If you are trans and you have a certificate from the Gender Recognition Panel you will be able to marry someone of the same or opposite gender if the ceremony takes place in England or Wales.

As civil partnerships are only intended for same-sex couples, you can only enter a future civil partnership if you are both going to be of the same gender at the time of the ceremony.

If you are already married and have transitioned, you can continue with your marriage unless your spouse disagrees.

If you are in a civil partnership and are planning to transition but want to stay together in legal terms, then you have to decide whether to dissolve the partnership or convert it into a marriage. 

If you both intend to transition to the same gender then your civil partnership will be able to continue uninterrupted, as you will still be a same-sex couple.

18th June 2020