When a marriage breaks down, both parties are often faced with many difficult decisions to make. There are decisions to make about the care of the children, the matrimonial home to consider and let’s not forget the distribution of assets/money. And with the new, simpler ‘no-fault’ divorce law now in effect, some couples may not take the time to properly discuss, value or share their finances.
Pension sharing
Many couples do not realise that since 2000, divorcing couples are also allowed to share pensions. Recent statistics from Which? indicates that only 15% of divorcing couples include pensions in their financial settlement. Many do not understand the implications of sharing pensions and this can have a significant detrimental effect on them in later life.
Pensions are often the single biggest asset for divorcing couples (after, or sometimes including the family home) and make up 42% of total household wealth, according to the Office for National Statistics. By comparison, the share of wealth held in property is 36%. With such a high figure, it is therefore concerning that for many, pensions don’t form a greater part of the discussions when parties are considering divorce and financial settlement.
Understand the value of your pension
Pensions feel irrelevant to people unless they are close to retirement age. For that reason, financial discussions within divorce proceedings often focus on the family home or business or other more immediate cash assets such as savings and investments. But underestimating how valuable a pension can be is a common mistake particularly for women. Many women choose to retain the family home and do not consider a claim against their husband’s pension. As a result, they can be left with desperately little income in retirement and find themselves facing pension poverty.
Typically pension wealth is unequally distributed amongst men and women. Women often have up to ten times less than men and with the number of divorces in later life increasing, it’s important that any financial settlement upon divorce deals fairly with pensions as well as other matrimonial assets.
Securing your financial future
Erica Kemp, Director, and Head of Family Law at Alsters Kelley explains. “When you divorce, your financial settlement should deal with all of your matrimonial assets, including your pensions. As a woman, you may have given up working or reduced your hours to focus on caring for the children during the marriage You might therefore find that not only do you have a smaller private or work related pension than your husband, but you might also not have paid enough National Insurance contributions to qualify for a full state pension.
Erica continues. “According to the University of Manchester’s Pensions Policy Institute, the average 64–69-year-old man has £260,000 saved, whilst the average woman of the same age has just £28,000. We urge anyone getting divorced to seek professional legal advice, so that they fully understand their rights and what could be due to them.”
Erica concludes. “At Alsters Kelley we offer a 30-minute free consultation, during which we can help identify the key issues and assets that parties should consider when they are thinking about a financial settlement. Taking proper account of all the matrimonial assets including pensions can make an enormous and positive difference to the lives of many following a divorce.”
Free initial meeting for support and advice
If you would like some help to plan for a more secure future after divorce or separation, please contact Erica Kemp, Director and Head of Family Law, telephone 01926 356000, or email erica.kemp@alsterskelley.com.
Call now on 01926 356 053 to book an initial consultation for £300 plus VAT to speak to one of our Family Law specialists.