How Divorces Can Lead to Pension Poverty
New Pension Statistics from the Office for National Statistics
New statistics from the Office for National Statistics (ONS) released on 1st February 2022 reveal that in 2020 there were 103,592 divorces granted in England and Wales. The new ‘no-fault divorce’ came into force on 6th April 2022. ‘No-fault divorce’ introduces a more accessible way for couples to divorce amicably. Therefore, with the new ‘no-fault plea’ the ONS expect the number of divorces to rise in the coming years. As a result, more divorcees are finding themselves in pension poverty due to mismanaged finances during their divorce.
Considering Your Pension During a Divorce
Divorces are an unpleasant time with much to consider between both parties. It’s not uncommon for couples to forget their pensions during this period. In fact, one in seven people don’t know that a divorce will affect their pension. However, it is important that they are considered as one in five divorcees will be significantly worse off in retirement due to their divorce. Additionally, one in twelve divorcees do not have their own pension as they were solely relying on their partner’s pension for their retirement. Therefore, it’s always important to consider your pension before entering a divorce. Agreeing on a fair division of your pension before or during your divorce is essential to securing a financially secure retirement.
The ONS states that the UK holds £15.2 trillion pounds in household wealth. Of this sum, private pensions make up the largest part at around 42% of the current total. The current average age of divorce at 47 for men and 44 for women. At this point, it’s likely for the parties to acquire a considerable pension.
New research from Aviva states that two-thirds of divorced couples make a claim on their former partner’s pension. Additionally, the pension was not included as an asset in the settlement when the couples divorced.
Facing Pension Poverty After a Divorce
After a divorce, a third of divorcees stated they had to supplement their income with their savings. Additionally, one in five divorcees had to use a credit card for everyday living expenses. A similar number of divorcees also had to borrow money from friends or family. Just over one in seven divorcees stated they had to regularly sell their personal possessions such as toys and clothes, to supplement their income. Furthermore, one in eight respondents stated they had to go back to work and one in ten stated they had to pick up a second job. To make ends meet, one in eight reported either cutting back or cancelling their pension contributions, therefore putting their retirement income at further risk.
How a Divorce Solicitor Can Help You Avoid Pension Poverty
A pension sharing order is a court-issued order that states exactly how your pensions will be divided after your divorce. We understand how important it is to set out legally binding agreements about pensions. Therefore, we are here to make sorting out your pension-sharing order as simple as possible and avoid pension poverty.
Find out more about Pension Sharing Orders here.
All advice is correct at time of publication.