Divorcees suffer £4k pension cut

Divorcees suffer £4k pension cut

Divorcees can expect to retire on £3,800 a year less than those who have never divorced, according to new research.

Prudential's class of 2018 survey showed the expected annual income for divorcees retiring in 2018 was £17,600 compared with £21,400 for those who have never experienced a marriage break up.

Divorcees are also more likely to have no pension savings at all when they retire (15 per cent) compared with those who haven't been through a divorce (11 per cent).

Article continues after advert

About one in seven (14 per cent) of this group even expect to have incomes lower than the benchmark set by the Joseph Rowntree Foundation of £192.27 a week, or £9,998 a year.

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

She explained the stress of getting through a divorce meant people might focus on the immediate priorities like living arrangements and childcare instead of their pension fund.

But "a pension fund is one of the most complex assets a couple will have to split so anyone going through a divorce should seek legal and financial advice to help them do so," she added.

Prudential surveyed 9,896 non-retired UK adults aged 45 plus between 29 November and 11 December 2017, including 1,000 planning to retire this year.

Prudential also analysed the latest available divorce statistics from the Office for National Statistics, published on 18 October.

The figures, covering up to 2016, showed the number of people getting divorced has started to increase again and those over the age of 55 were particularly active in 2016 when compared with the year before.

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

Prudential said those who have been divorced are more likely to retire in debt (23 per cent) than those who have never been divorced (16 per cent), albeit their debts are typically lower, at £30,500 compared with £36,900.

Mr Collins said: "This research highlights the importance of divorced couples continuing to pay into their pensions even after a pension share on divorce has been implemented. 

"Usually, a pension built up during the marriage is shared equally on divorce. If the divorcing couple are some way off retirement, this often gives the person receiving the pension share the chance to plan.

"The fact that divorcees tend to have lower debts than their married counterparts may be down to the courts encouraging a clean break between divorcing couples where a clean break is affordable."

Anna Sofat, founder of Addidi Wealth, said she was not surprised by the numbers from Prudential.

From a financial planning perspective, she said, it was best to "discuss, agree and plan for a future together as well as the potential for a separate future".