Pensions  

Calls for pension recognition in divorce settlements

Calls for pension recognition in divorce settlements

Age UK is calling for private pensions to be made a "proper" part of the divorce process for those who don't settle their divorce through the courts.

Many women are missing out on retirement income after getting a divorce because not enough couples consider private pensions as part of the divorce process, the charity claimed.

Divorce settlements in court normally feature private pensions but outside of the courts this does not happen automatically, with many couples routinely considering how to divide up the value of their homes but not their pensions, the charity claimed.

In its policy report ‘For love and money: Women’s pensions, expenditure and decision-making in retirement’, which was published yesterday (13 September), the charity said half of couples don't divorce through the courts, meaning there is a need for the divorce process to be changed.

According to the charity, women don’t realise they are entitled to a portion of their husband’s private pension wealth or underestimate the need to divide it after a divorce, hence they often walk away with no continuing rights to it.

Caroline Abrahams, charity director at Age UK, said: "The government must act quickly to make consideration of private pension wealth a proper part of the divorce process.

"In recent years we have learned a lot about the way in which women born in the 1950s have been hurt by steep rises in the age at which they can take their state pension; sadly our new report has found that many divorced women are also being unfairly disadvantaged when it comes to private pension provision too.

"The money many divorced women are currently going without could make the difference between having to count the pennies or being comfortably off in retirement, so this has huge implications for them. 

"It is crucial that women are helped to build up a decent private pension, get the right information and advice at the right time, and as a matter of law and practice have fair and equal access to the private pension wealth they have built up with their husbands if they are divorced or bereaved later in life."

The charity's report also found that 70 per cent of couples do not discuss their pensions prior to divorce and that 40 per cent of women aged 55 to 70 were dependent on their partners' income for a decent retirement.

The report found 68 per cent of married couples pool at least some income, however the charity warned this does not guarantee the financial outcomes for women later on.

Gordon Andrews, financial planning expert at Quilter, said: "When couples divorce there are a number of ways that pension assets can be divided – there is no default solution. And there are risks even when each partner is aware of the pension assets if they are not divided in the most beneficial way.

"Some couples choose to divide through an attachment order which is a form of maintenance that obliges a pension scheme to pay a certain percentage of monthly payments to the divorced spouse. This comes loaded with risks as if the spouse remarries the divorced spouse can lose the pension income. An alternative is a pension sharing order which allows for a clean financial break by dividing assets at the time of separation.