Divorcees lose £3,800 a year in retirement

Published by Marina Gerner on 26 February 2018.
Last updated on 26 February 2018

Divorce

Divorcees who plan to retire in 2018 will receive £3,800 less a year than their peers who never divorced, according to new research from Prudential. 

Retirement income for divorcees amounts to £17,600 a year. In contrast, those who never experienced a marriage break up can expect £21,400.

Another concern spooking divorcees is debt. Those who have been divorced are more likely to retire in debt (23%) than those who have never been divorced (16%).

"We are beginning to see many more people divorcing just prior to or during retirement," says Richard Collins, family law partner at Charles Russell Speechlys. "Couples now seem to be less wary about divorcing in their retirement years."

Clare Moffat, pensions specialist at Prudential, adds: "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."

But what is it apart from the cost of the divorce itself that makes divorcees worse off than their counterpart? We asked Tim Bennett, partner and head of education at Killik & Co, to outline some of the reasons. Mr Bennet says in addition to paying the cost of the divorce such as legal fees, divorcees are worse off because they have to fund two separate homes (including redecoration, mortgage, bills) and because their leisure expenses are not shared. 

Other potential factors are that "the pension assets may be being split at a non-opportune time in terms of market values and there are transaction costs associated with doing so regardless". The same is true for Isa savings and other investments.

He adds: "Women tend to outlive men, plus one partner may be considerably younger than the other and it’s often (in part because of the way the law and society still works) the man’s pension that is being wrangled over – when you change the assumptions on a pension e.g. age of retirement and/or number of beneficiaries, it changes the payout."

And finally, he says that "post-divorce, paying into a pension is often a low priority which means the value of the fund will suffer". 

Richard Collins, family law partner at Charles Russell Speechlys, adds that usually a pension built up during the marriage is shared equally on divorce.

This article first appeared on our sister website Money Observer.

Pensions made simple with PensionBee

Advertisement
  • Combine your old and lost pension pots into one online plan
  • Take complete control and have 24/7 access to your pension balance
  • Your own dedicated BeeKeeper (account manager)
  • Make withdrawals online from the age of 55

More About

Leave a comment