The latest research on pensions reveals that many divorced women in the UK are financially unprepared for retirement. Two thirds of those over 40 rely entirely on their state pension, with the remainder topping-up their retirement income from savings and investments. Most do not have personal pension funds. Worrying statistics, given that the divorce rate currently peaks between the ages of 40 and 44.
This situation is perhaps unsurprising. Many divorcees married at a time when social expectations were different, and giving up work to raise a family or taking part-time, lower paid roles, was the norm. Over half of all divorced women didn’t pay into any pension scheme whilst married. Nowadays husbands and wives often have comparable incomes, and the opportunity to pay into a pension fund is impacted less by the demands of family life (although issues do remain). However, as a Family Solicitor dealing with Divorce Settlements, this lack of planning causes me major concern particularly as any pension fund is likely to be the second most valuable asset, after the family home.
It is essential to get Divorce Advice before reaching a financial agreement. For many, financial planning for retirement is often way down the list of priorities, especially those who have only just hit their forties. However, I urge all those going through this process to take time to consider their current pension provision, and obtain independent financial advice as sadly, the research suggests that 40% of women are financially worse off after divorce. Combined with evidence that 20% stop paying into a pension scheme entirely, and that the same proportion are unaware of what pension provision, if any, they have, the future financial security of divorced women does not look promising. In fact, 40% of the women surveyed said they did not know what they had agreed to in reaching their Divorce Settlement.
Pension funds usually form part of the ‘pot’ to be divided and should not be overlooked. There are many different types of fund, but often the fund can be shared to reflect the joint endeavours of a couple over the years of their marriage, whether via a financial contribution or looking after the welfare of a family. Typically, but by no means always, a wife’s interest in a pension fund may be ‘offset’ against the husband’s interest in the house, because the wife’s ability to raise a mortgage is reduced due to child care commitments, reducing earning potential, or both. This scenario is often what leads to a lack of additional pension provision, and arises from attempts to achieve a ‘fair’ result, however retirement planning should not simply be placed on the back-burner.