Q: My partner wants to open a joint account. What are the risks?
Answer: A joint account is a rite of passage for many couples looking to simplify things. Rather than quibbling over every shopping bill you just put your money into the same account and trust each other not to go crazy when the sales are on.
It also demonstrates a level of trust between a couple, playing an important emotional role. A joint account also means you can borrow more as your incomes and savings are pooled.
A creditor can look at your joint saving and offer you far more money than if you were looking to borrow by yourself, making simple steps like getting on the housing ladder more attainable.
But if it’s so great why doesn’t everyone do it?
The risks of a joint account
Unfortunately the convenience of a joint account also comes at a price. First of all there is the obvious point: trust. A joint account gives your partner access to all your money, so your relationship should be on secure footing.
Should one partner choose to withdraw or spend a large amount of money you have no legal ground to get it back if it’s a joint account.
However, the risks are also more technical. Everyone’s savings are protected by the FSCS compensation scheme in the UK to the tune of £85,000 per provider, but those limits don’t double if you have a joint account, effectively halving your coverage.
What’s more ISA limits are per person, so you’re tax free savings allowance will similarly be curbed if you choose to pool your resources.
That means that when it comes to day-to-day spending a joint account can be very convenient, but when it comes to saving larger amounts a little distance could be a blessing.