Divorce could leave you with £30,000 less in retirement

02 Nov 2020
Middle-aged couple sitting apart

In a divorce, many people overlook their pensions and retirement savings when agreeing a financial split. However, the consequences of this can be significant, with a shortfall in your retirement finances and potentially even a future claim from your ex-spouse.

One in four divorces occur after the age of 50, and those in their 50s save on average £57 less each month towards retirement after they split, according to new research from Legal & General. This adds up to £30,000 less by the time they reach 70, if they do not start saving more at a later date.

"When going through a divorce, people are understandably keen to come to a settlement and move on, but our research indicates that too frequently people do not fully consider the financial implications and how that might impact their future retirement," commented Sarah McLeish, CEO of Legal & General Financial Advice.

"We found that people in the process of divorcing tend to focus on the family home, and overlook the mutual value of their pensions. Considering one, but not the other, can leave one or both parties at a significant financial disadvantage."

According to the research, 50% of divorcing couples consider the value of their family home yet just 12% consider pensions when dividing assets with their partners and 24% actively waive their rights to the value of them. Only 31% sign a Clean Break Order -- an agreement that severs financial ties and protects both parties from claims over any assets they may acquire in the future. As a result, more than two-thirds (69%) could be liable to a claim from their former spouses.

The perceived difficulty of disentangling shared incomes and property was cited as a key reason behind the fact that 33% of people delayed their divorce for longer than they would have hoped.

For everyone's sake, it's important that financial assets are divided fairly. Legal & General found that more than one-third (38%) of over-50s consider their divorces financially unfair, yet only 3% of people sought financial advice when going through the process. In fact, over-50s are four times as likely to seek advice from friends when going through a divorce as they are from a financial adviser; however, 20% said their divorce would make them more likely to consult financial advice in the future.

The additional expertise of a financial adviser can help ensure an equitable separation and a 'clean break', McLeish explained.

"Financial advice can allow both parties to be confident they have made the right decisions allowing them to embrace their fresh start on an equal footing."

At Fidelius, we'll do everything we can to guide you through the financial upheaval of divorce. We can provide projections based on the proposed financial settlement and the likely costs that may be incurred, as well as assisting with Form E and pension actuarial matters. We look to speed up the process to help rebuild and secure your financial future.

Contact us today to find out more.