Divorced Women Losing Out on Pension Wealth Warns Former Pensions Minister
Posted on: 29 January 2019 by K J Smith
In an age where terms such as silver splitters and diamond divorcees are commonplace, it is surprising to see how many couples still don’t know their legal rights when it comes to splitting pension wealth following a divorce.
Understandably, the last thing on your mind on the big day is divorce, but as the number of over 60s choosing to divorce continues to increase, it is important to prepare for whatever the future holds to avoid being left in financial hardships when the time comes to retire.
Former Pensions Minister, Sir Steve Webb, warned that divorced women “are ending up as the poor relations when it comes to pension wealth in later life”. He went on to say that “when couples split up there is an understandable focus on family issues and on highly visible assets such as the family home. But very often one partner will have pension rights which are less visible but can be just as valuable”, “for example, someone with long service in a final-salary type pension can have rights worth hundreds of thousands of pounds which can be a crucial part of a fair divorce settlement”.
Analysis from insurance company, Royal London, found that the average married couple has three times the pension wealth of the average divorced woman. The insurer, who is the largest mutual insurer in the UK, is encouraging the legal system to ensure that pensions receive the same recognition as other household assets during divorce proceedings.
Research based on the Office for National Statistics Wealth and Assets survey which looks at over 50s divorce, found that the average married couple over 50 has double the housing wealth of the average divorced woman of the same age, with couples accumulating £359,000 compared to divorced women with a housing wealth of just £169,000.
On the other hand, analysis revealed that divorced men in that same age group have an average pension wealth of around £235,000 and a property wealth of a whopping £191,000.
In a month where divorce rates skyrocket following relationship breakdown over the stressful festive period and as divorce rates among those over 50 creeps up, it is more important than ever to know your legal rights as a divorcee when it comes to spitting pension wealth.
Courts deal with pensions in a number of different ways when a marriage or civil partnership comes to an end; these include pension sharing, pension offsetting and pension earmarking. The court will decide to either give you a percentage share of your former partner’s pension (sharing), offset the value of your pension against other shared assets such as the family home, or pay a percentage share of your pension to your former partner (earmarking).
It isn’t just the courts which determine how divorce affects your pension wealth, but the type of State Pension you have also. Your basic State Pension and new State Pension cannot be shared following the breakdown of a marriage or civil partnership, however if you have an additional State Pension the court could decide to share this between you and your partner once you separate.
Divorce proceedings are complex enough as it is, and paired with the stresses and complications surrounding pension wealth, it can be very difficult for couples to navigate through the legal process. There has however been a call for pension recognition in divorce settlements, but it is simply a waiting game to see what changes are made.
K J Smith Solicitors are a specialist firm of family solicitors in Reading and the Thames Valley area.