In Focus: Advice for Women  

What's best on divorce: the pension or the property?

  • To understand why a couple might divide assets in a certain way.
  • To be able to explain the necessity of proper pension advice.
  • To be confident in recommending that solicitors discuss pensions values with clients.
CPD
Approx.30min

She says: "While the man is not left with the house, they have the facility to buy another house. Typically, their income and wages are higher and they have their pensions safe and secure.

"By the time both people are 60 the man has a house and a pension, and the woman has no pension or a tiny one. She also has a house that she needs to sell to downsize - but outside of London and the South-East, she is not likely to see much equity in that."

When you consider the figures - there were 107,599 divorces of opposite-sex couples alone in 2019, increasing by 18.4 per cent from 90,871 in 2018, according to the Office for National Statistics - they equate to potentially thousands of women facing a poorer pension outcome, even if they stayed in the family home.

MacGillivray, points to three main factors working against women's ability to rebuild a pension pot post-divorce:

  • Years to retirement.
  • Affordability.
  • The annual allowance.

Of course, there are exceptions to every rule, but Price says the stereotypes "hold true" in this case: typically, the women might get the house but they also get a far rougher deal financially when they hit retirement age.

She speaks of one person she came across during her research: "One woman's husband urged her to leave the pension off the table; he kept saying this would not be taken into account as part of the divorce deal.

"She is now 63 and has no pension. Her husband’s pension was worth more than £1m and nobody knew about it. He is living a very nice life and she has nothing, after being married for more than 25 years and bringing up their children."

So, what can the adviser do?

Hughes says: "A financial adviser can help someone facing divorce understand their various pension options, what impact their actions today could have on the size of their future retirement savings pot and the tax implications."

For example, a financial adviser can help someone facing divorce consider whether they would be better off balancing their pension rights against the other person’s income, "earmarking so that when one person’s pension comes into payment part of it will be paid to the other person or splitting both pots at the time of the divorce", she adds.

MacGillivray offers some practical ideas, although not many seem palatable. He warns: "If [the woman] has little in the way of relevant UK earnings, there is not much that can be done, unless they are prepared to forego tax relief, and assuming they have sufficient capital to make contributions in the first place."