The first working Monday of the new year has earned the unfortunate nickname of 'Divorce Day' among solicitors because there is often a spike in couples seeking to end their marriage following the festive period.
Property, investments and savings are often the financial assets that come to mind in divorce or the dissolution of civil partnerships - but pensions, despite usually being the biggest asset, are often left out of the conversation.
One of the stark findings from interactive investor’s Great British Retirement Survey 2023, involving a sample of over 9,000 UK savers, is that two-thirds (67%) of divorcees had not discussed pensions during divorce proceedings.
Women are seemingly at greater risk of missing out on pension money in divorce, with three-quarters (75%) of divorced women surveyed admitting to not discussing pensions as part of their settlement, compared to 56% of divorced men.
Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “The process of untangling two lives that were once intertwined isn’t easy, and often brings both emotional and financial challenges. How to divvy up finances is often a source of contention, with the home normally seen as the prize asset, while pensions are often overlooked.
“People grossly underestimate the value of pensions, but they are usually the largest asset for divorcing couples, accounting for 42% of household wealth on average, according to the Office for National Statistics (ONS). Our research shows that most couples don’t discuss pensions during divorce proceeding, which is leading to many people – particularly women – missing out on future income which probably should have been theirs.
“The toll of the emotional stress during divorce proceedings, the misconception that other assets take precedence and a critical lack of awareness regarding the long-term financial implications are among the reasons why pensions aren’t considered. The ever-shifting pensions landscape doesn’t help matters, making it difficult for people to assess the real, long-term value of pension pots.
“No one goes into a marriage with the intention of getting a divorce. Even so, taking steps to understand your own household’s finances is prudent, giving you a clearer understanding of your entitlements should the relationship break down, at worst, or helping you make informed financial decisions for a comfortable existence as a couple.
“Pension considerations in a divorce are not always straightforward. Offsetting them against other assets such as property might work for some, while splitting the pension or earmarking future payouts may work for others. Matters get even more complicated if couples have been married before. It is worth consulting a solicitor to understand the legal aspects and options related to pension division.”
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