Pensions  

How divorce can affect retirement

  • Explain why divorce among over 60s is on the rise
  • Identify the key factors couples in a divorce need to consider
  • Explain how advisers can help couples to be better prepared in a divorce
CPD
Approx.30min

Gender considerations

Our research has found that, financially, divorce tends to disadvantage women.

A third (31 per cent) of women stated that they were financially worse off in the year following their divorce, whereas only 20 per cent of men experienced the same.

Women could particularly benefit from helpful financial advice, but they are often hesitant to take advantage of it.

Divorcees need additional support so that they can confidently take the advice of professionals, secure in the knowledge that they will be financially better off as a result. 

However, there are also steps financial advisers can take when advising couples that are still together to prepare them in the event that they do separate further down the line.

When providing joint financial advice to a couple, it’s important that they are both aware of the overarching value of their assets. 

While many people, naturally, look to the family home as the most important consideration, the value of a pension can also have significant long-term implications on household finances.

We know, from our research, that people often do not take this into account. Lack of awareness on the importance of pensions can present particular problems in the event a couple divorce.

During a divorce, just 12 per cent consider pensions when dividing assets with their partners and 24 per cent actively waive their rights to the value of them

When working with a couple, advisers benefit from understanding the financial aims and goals of both parties well and can strive to reach the best outcome for both people involved.

We know that the earlier a client seeks advice, the better, so advisers should encourage people to see them as an accessible resource at the point their circumstances change. 

If advisers have the tough conversations with their clients early on, couples can have a more equitable separation if they divorce further down the line. A third of financial advisers say that people got in touch with them too late – so it benefits everyone if the process feels accessible. 

Future planning the “what ifs”

An important part of financial planning is helping clients to anticipate that some life events have the potential to throw their best laid plans off course.

As part of their work with couples, financial advisers should help prepare their clients for the unexpected, to help them develop greater financial resilience should difficulties pop up in the future. This could include loss of work, care costs or unforeseen debts. 

Divorce, while an emotionally sensitive topic, and something couples may not want to entertain, can be a real bump in the road to future financial independence.