The increase in the average age of people getting divorced is leading to more complex financial settlements, including disputes over pension pots, according to recent figures.
The number of pension attachment orders made by family courts since 2011 has doubled, according to figures obtained from the Ministry of Justice by law firm Nockolds.
As first reported by the FTAdviser’s sister newspaper the Financial Times, 4,632 pension attachment orders were made by the family courts in 2018, up from 2,283 in 2011.
A pension attachment order redirects part or all of the member’s pension benefits to the ex-spouse or civil partner when it comes into payment.
Despite the number of divorces falling from 129,313 to 118,142 in 2018, a decline of 8.6 per cent, the rise in the average age of people getting divorced has led to more complex financial settlements which include disputes over pension pots.
According to data from the Office for National Statistics, the average age at divorce for is 46.4 years for men and 43.9 years for women. The average age of divorce has continued to increase since 1985.
Pension pots can often be the second most valuable asset when people are going through a divorce. Despite this they are often overlooked, with people paying more attention to property assets.
Francesca Davey, an associate at Nockolds, said: “Pensions are increasingly a major issue in divorce but for the growing number of older couples getting divorced private pensions are often the most valuable asset after the family home.
“With more people undertaking DIY divorces online, the chances of making a mistake in relation to pensions is increasing.
“In many cases a pension attachment order may not be the most appropriate remedy. This is because the order does not prevent a person from transferring money out of their pension or oblige them to continue paying in, so unless the pension is already in drawdown, it can be ineffective.”
According to Nockolds, a pension sharing order will be the most equitable way of dividing pension assets for most couples.
The advantage of a pension sharing order is that the assets are divided at the point of divorce, allowing the applicant to pay a lump sum into their own pension pot, or start paying into a new scheme. It also allows individuals to plan ahead, Ms Davey said.
However with a pension attachment order the pension provider will have to pay a percentage of monthly payments from one individual to the divorced spouse, this means there is no clean break.
Ms Davey said: “People getting divorced later in life need to think carefully about whether a pension attachment or a pension sharing order is the most appropriate remedy.
“A pension attachment order is risky unless the pension is already in drawdown and it is important to look at exactly what benefits the pension type offers to avoid losing out by choosing the wrong option.”
Tim Morris, an independent financial adviser at Russell & Co said: “With the astounding cash transfer values offered by some defined benefit pension schemes, pensions have overtaken property as the most valuable asset for many retirees.
“The ease of splitting this pot than a less liquid asset such as the family home, or a straight trade off, means those who have had ‘itchy feet’ for a few years may feel they have sufficient financial freedom/stability to fly the nest regardless of age.
“While I think that the majority of the UK still believe in marriage, perhaps it’s not the national institution that it once was. Either way, it appears money and financial independence is a motivating factor in this changing trend.”
amy.austin@ft.com
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