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28 Feb 2018

Divorced retirees have lower retirement income

People who get divorced tend to have a lower income in retirement and are more likely to retire in debt and without private pension savings, according to research from Prudential.

Among the ‘Class of 2018´ — those who plan to retire this year — the expected annual retirement income is an average of £17,600 for those who have previously been divorced, compared with £21,400 for those who have never experienced a marriage break up.

Overall, divorcees are also less likely to reach the minimum standard for annual income set by Joseph Rowntree Foundation. Around one in seven (14%) who have been divorced will have incomes lower than the charity´s benchmark of £192.27 a week, or £9,998 a year, compared with 12% of those who have never been divorced.

It´s not all bad news for divorcees, however, as they will retire with lower debts (£30,500 compared with £36,900).

Clare Moffat, pensions specialist at Prudential, commented: “Divorce can have a huge financial impact on people´s lives. Many may not realise that the cost of divorce can last well into retirement, as divorcees expect retirement incomes of nearly £4,000 less each year than those who have never been divorced.

“The stress of getting through a divorce can mean people understandably focus on the immediate priorities like living arrangements and childcare but a pension fund and income in retirement should also be a priority. A pension fund is one of the most complex assets a couple will have to split so anyone going through a divorce should seek legal and financial advice to help them do so. For many more couples, the increase in value of pensions mean that it is often the largest asset. It goes without saying that advice is crucial as early as possible in any separation where couples have joint assets.”

Richard Collins, Family Law Partner at Charles Russell Speechlys, added: “The fact that divorcees tend to have lower debts than their married counterparts may be down to the courts encouraging a clean break between divorcing couples where a clean break is affordable. This allows divorcing couples to regain control over their own finances and consider how they want to plan for their separate futures. Many divorced couples re-evaluate their spending and finances after divorce and take this opportunity to build a stable financial future for themselves including growing enough pension provision for their retirement. I´ve seen people post-divorce relishing their independent financial status and seizing the opportunity to make financial decisions for themselves, knowing that they are building up wealth and securing their future.”

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