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08 Nov 2017

Divorced women missing out on pension savings

Women in the UK are losing out on £5bn every year because seven in 10 couples don´t consider pensions during divorce proceedings, according to new research from Scottish Widows.

What´s more, even when pensions are discussed during a divorce settlement, women are still missing out: 16% lost access to any pension pot when they split with their partner and 10% were left relying completely on the State Pension.

Overall, the survey found that women are less well prepared for retirement than men, with 52% of women saving adequately for the future compared with 59% of men. This figure falls to below half (49%) for divorced women, with nearly a quarter (24%) saying they are unable to save anything at all into a pension — twice the rate of divorced men (12%) saving nothing. And two-fifths of divorced women (40%) say their retirement prospects became worse as a result of the split, compared with just 19% of men.

The research also uncovered confusion around how pensions are dealt with when a couple gets divorced, with almost half of women (48%) admitting they have no idea what happens. This may go some way to explaining why so few couples consider them as part of a settlement, Scottish Widows said. Meanwhile, a fifth (22%) presume that each partner keeps their own pension and 15% believe they are split 50/50, no matter what the circumstances.

In reality, it depends on each couple´s circumstances but pensions can be dealt with in a number of ways on divorce. One option is known as ‘offsetting´, whereby one partner keeps their pension, but the other gets more of the other assets. In some cases, the court will make a ‘pension sharing´ order, giving a percentage of one partner´s pension to the other (which could be 50/50 but often won´t be). Sometimes, a combination of these two may be needed. However, Ministry of Justice figures show that there were only 11,503 pension sharing orders in 2016/17, which represents just 11% of all divorces that year.

Nigel Shepherd, head of family law at national firm Mills & Reeve, said: “Pension sharing was introduced almost two decades ago, but it is clear that all too often in a divorce pensions are still not being taken into account properly or at all. The problem has been made very much worse by the fact that so few people are now entitled to legal aid and are having to negotiate the minefield of financial issues on divorce without even basic legal advice. This is storing up real problems down the line, in particular for women.

“While some pensions are relatively straightforward, others (for example public sector schemes) are complex. There is no substitute for expert legal and financial advice and the costs involved should be considered an investment.”

Copyright © M2 Bespoke 2017

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