Financial planning with weddings in mind

While one of the nicest weddings I have been to was held in a church hall, with food and photographers provided by the church, this isn’t going to suit everyone. A recent survey by Ireland’s Wedding Journal magazine showed that the average cost of a wedding is now over £22,000. This, on top of saving for a house deposit, or paying off student debt, can be an impossible dream for many couples without help from their families.

The Government does give some tax breaks when it comes to funding weddings. For example, grandparents can each give £2,500 to a grandchild or great-grandchild and the gift is immediately exempt from inheritance tax; parents can give £5,000 to their child in consideration of marriage and the gift is exempt from inheritance tax; and anyone can give £1,000 in consideration of marriage and it is immediately exempt.

Some parents are starting to use their pension funds to pay for their child’s wedding. The new pension freedoms that were recently introduced allow money in pension schemes to be accessed at age 55 in a flexible way. For example, it is possible with most personal pension schemes to take a lump sum out at age 55 and still continue to contribute to the pension to replace the money taken out early. It is very important to take advice before doing this, as there are some funding restrictions imposed on pensions after money has been withdrawn early.

The Government’s Pension Wise service, which in Larne operates along side the Citizens’ Advice Bureau, is a useful place to go for information on how the pension rules work, at no cost to the consumer. Most independent financial advisers will be able to give specific detailed advice for an agreed fee.

In many cases, the money taken from a pension scheme up to 25 per cent of the fund value will be completely free from income tax and anything beyond this amount will be taxed at the pension owner’s marginal rate of tax. So it can make sense for some people to actively save extra into a pension pot and receive tax relief from the Government on those savings before using the tax-free lump sum that is generated to fund wedding costs. This option is open to those under the age of 75 and who expect to be over 55 when wedding costs occur.

For others, saving money into a flexible and easily accessible investment ISA can be a simple way to set money aside for future wedding costs.

David Hill is a Chartered Financial Planner and Independent Investment Adviser at Hills Financial Planning, 15 Agnew Street, Larne. He can be contacted on 028 28276814, email [email protected] or see www.hillsfinancialplanning.co.uk