How to manage pay gaps in your relationship

Only a tiny fraction of couples have equal incomes, so most of us are navigating pay gaps in our relationships.

Bigger relationship pay gaps can be a permanent fixture, or hit during specific periods – like early parenthood or later in life when the pay gap widens more generally. The difference in earnings can be even more striking in retirement, because the gender pensions gap is 48%.

It’s worth giving it some thought if you want to avoid these pay gaps causing needless friction, and there are five key questions to ask.

1. Should you have a joint account?

Some couples will pool all their resources in a single joint account and run a joint budget. This is particularly common when one person isn’t working, or is earning substantially less than the other, because it removes income inequality from the equation entirely. However, it doesn’t work for everyone. It has the potential to cause rows over spending, it gives someone else equal control over your cash, and if your partner isn’t good with money they could end up running up debts in your name.

More commonly, couples will have a joint account for household expenses, which they manage together, and then separate accounts for their own spending. It ensures the essentials are covered and yet gives each person the freedom to buy the things that are important to them.

2. How much should you each contribute to joint expenses?

Couples with relatively similar incomes may decide to split household expenses 50:50, so they both pay the same amount into this account. However, where the gap is bigger, this can cause issues. It can mean the lower earner is over-stretched, or that the couple has to compromise their lifestyle. It will mean the higher earner has more cash of their own to spend on the nice-to-haves, which can rankle with the lower earner.

Some couples will contribute proportionally instead, so if 75% of the household income is earned by one person, they cover 75% of the joint household expenses, so the partner with the broadest financial shoulders is carrying more weight. However, the higher earner needs to be comfortable with putting more into joint expenses in this scenario.

3. Should you have the same lifestyle?

If you can contribute to the joint expenses in a way that leaves you with the same amount of money to spend on nice-to-haves, you automatically have equivalent lifestyles. However, if the split leaves one of you with more money, consider both of your expectations around how that’s spent. If the person on a higher income expects to spend it on improving their own life, and their partner expects them to pay for the nice-to-haves for all the family, it can cause issues. It’s worth having the conversation in principle, before it becomes a row over specific purchases.

4. How should you prepare for the future?

When you’re saving together for short-term goals, make sure you’re both clear from the start how much you can both afford to save and what you consider to be a fair way to split the cost, so there are no misunderstandings. Where only one of the couple is earning, they will need to do all of the saving, but you should still discuss where it fits in your overall priorities.

For retirement, you’ll need to talk about your retirement income, and whether you’ll each live off your own pension, or pool your resources. When you have a big pension gap, the practical approach is often to bring everything together, but if you don’t currently have completely joint finances, you need to consider whether this is something you’re comfortable with. You also need to think about your position if you split up.

If you both want retirement savings of your own, pension planning needs to be part of your joint financial planning. Where only one person works for a period, it can mean paying into the pension of their non-working partner as well as their own. When both of you are earning, but there’s a significant income gap, you need to consider whether it’s a priority to ensure the pay gap doesn’t turn into a pensions gap.

If you are aiming for similar pension pots, it can make sense to subtract pension contributions from pay before deciding what proportion to pay into the essentials pot. This ensures neither of you neglects your pension, and the lower earner can make up as much ground as they need to. However, it can mean they put much less into the essentials pot – which you both need to be happy with.

If you’re happy for the pay gap to persist in retirement, as long as you both have something of your own, then you can pay into the essentials account first, and cover pension contributions out of your personal spending account. You just need to make sure the lower earner can afford to make the contributions they need.

5. Are you dealing with any emotional fall out?

It’s worth considering whether the pay gap in your relationship has created any relationship issues that you need to address separately. The higher earner may be resentful that they’re contributing more, or missing out on the lifestyle they could have had if you both earned the same. They may also feel under pressure to keep earning at this level.

Meanwhile the lower earner may resent it if the split you settled on leaves them over-stretched. Alternatively, they may worry about being dependent and feel under pressure to contribute in other ways – such as doing more of the unpaid labour in the household.