71% of Divorcing Couples Don’t Discuss Pensions

11 January 2018

Pension funds are often the second most valuable asset that a married couple has (behind the family home), yet astonishingly a significant number of people disregard pensions entirely when getting a divorce. Recent research carried out by Scottish Widows found that a staggering 71% of divorcing couples don’t even discuss pensions during their divorce proceedings.

The report also highlighted that divorced women tend to be worse off in retirement as a result, see Divorced Women are Less Prepared for Retirement.

Why is it Important to Discuss Pensions during Divorce?

The average pension pot in the UK is now worth around £50,000, which is a substantial sum of money. This makes pensions significant assets, and for this reason it’s absolutely crucial that they are included in any financial discussions that take place during a divorce.

When a couple get divorced, one person may find themselves significantly less prepared for retirement than the other. This could be because one person gave up work to raise a family, while being financially supported by the other, or it could be that they were on a lower income or didn’t work. It may be that they simply didn’t prepare as they knew that their spouse had prepared adequately to support them both financially in their retirement.

This means that when the couple separate, if pensions are not taken into account one person might find that they are not able to support themself financially in retirement.

Make Pension Arrangements with a Financial Order

When getting a divorce, a Decree Absolute legally ends your marriage but it won’t necessarily resolve financial matters between you and your ex. It’s always best to obtain a Divorce Financial Order from the Court to ensure that this is taken care of; so your ex won’t be able to make a financial claim against you in the future.

A Divorce Financial Order determines how the matrimonial money and assets of a couple should be distributed between them after they divorce. Pension funds will be taken into account during this process and the Court can chose to redistribute one person’s pension between the couple if this is the fair thing to do.

The Court can arrange for the pension to be distributed between the couple using either Pension Offsetting, Pension Attachment or Pension Sharing. For an explanation on how each of these works, see What Happens to My Pension on Divorce?

Calculating how to share a pension out between a couple is complicated, as this will depend on how the pension scheme in question has been set up, while also taking into consideration certain personal details relating to the couple. This is likely to include their ages (including any age difference between them), their life expectancy and their individual assets and finances.

It’s important that both people obtain independent legal advice before agreeing to any financial settlement during a divorce. This will help to ensure that the arrangement is fair for each person as well as making sure that both people are fully aware of the arrangement, their obligations and the implications of this.

If the arrangements set out in the divorce financial settlement are not considered by the Court to be fair (to each person), then the Court would be unlikely to approve the Financial Order.

To see the Women and Retirement Report 2017 from Scottish Widows please click here.

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