The Pension Gender Gap and Later Life Divorce

Chartered Financial Planner, Liza Pontone is as an ambassador for ‘Insuring Women’s Futures’, a programme established by the CII (Chartered Insurance Institute) in collaboration with leading insurance professionals, businesses, policy and third sector organisations and experts on issues relating to women’s financial risk.

Why is this role so important to Liza? She is working hard to improve women’s pension outcomes, as sadly many British women in retirement are facing poverty.   The ongoing gender pay and pension gap, coupled with women sacrificing careers to fulfil a caring role means women are particularly vulnerable on divorce, having little pension accumulation themselves.  A wife usually has fewer assets than her husband, therefore divorce is sadly just one of the unplanned and unexpected pitfalls faced by many women.

On 6 April 2022 the Divorce, Dissolution and Separation Act 2020 came into force, which now includes the ‘no fault’ divorce, ensuring that no party can apportion blame for the breakdown of their marriage.  This means that now a spouse or a joint couple can state that their marriage has broken down irretrievably and they can now be divorced within 6 months.

Covid 19 created what is known as ‘the accelerator effect’ with more than 2 million web searches during 2020 and 2021 relating to divorce, an increase of 12% in the last 4 years.  Therefore, it’s no surprise that following the introduction of ‘no fault’ divorce, according to the Law Society, between April and June 2022 a record 33,234 divorce applications were made. As reported by Legal & General, 1 in 4 were people over 50 years.  Later life divorce (known as the ‘silver splitters’) has risen by 64% since 1990.

Later life is usually a comfortable time financially in couple’s lives. Children are likely to be financially independent, homes mortgage free, savings and pension pots are much higher, and some couples may possibly be in receipt of inheritances.  Divorce can have a huge impact financially on either or both parties, yet according to Legal & General in 2020 only 61% consulted a solicitor during their divorce and just 3% sought financial advice.

Legal & General’s research also states 31% of women in their 60’s said they would waiver rights to their partners pension on divorce. Sadly, some women view the pension as a ‘fight too far’ yet pension values can usually be worth more than the family home. Both parties should be made aware of their legal right to share pensions.

“Divorce is a ‘moment that matters’ in a woman’s life” says Liza “Reaching out to a financial planner early in the divorce process can help you understand the nature and value of the various financial arrangements, including pensions, facilitating the structure of the divorce settlement. Ultimately, seeking professional financial can provide financial stability, help to navigate the financial elements of the divorce process, along with post-divorce financial matters”.

Pensions on divorce is a complex area of law and advice from a solicitor who is experienced in dealing with these issues is crucial. Lucy Adams a Family Solicitor at Knights, is accredited by the Law Society with an Advanced Accreditation for resolution of finances upon divorce and frequently handles complex pension cases.

“There are several ways that pension assets can be shared in a financial settlement following divorce. The two main options include a pension sharing order, or pension offsetting” says Lucy “Depending upon when the pension was acquired, it may be that the overall pension “pot” is split equally based upon fund value, or equally based on pension benefits payable. Alternatively, a split may be something other than an equal sharing.

There are several complex pension schemes, including armed forces, medical professions, the civil service etc. where considerable care needs to be taken to ensure that the spouse who is entitled to receive a fair share of the pension receives what is intended”

If you are going through a divorce, please seek advice both from both a Solicitor and a Financial Planner – we are here to help and to give you the clarity you deserve, minimising financial risk and enabling you to reach a fresh start.

Sources:
Pension Advisory Group (PAG) report 2019
Solving Women’s Pension deficit to improve retirement outcomes for all – Insuring Women’s Futures
Financial Vulnerable Taskforce – Independent representative body created by the PFS (Personal Finance Society) Inc.  Legal & General research plus Law Society

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