A recent report on women and retirement from Scottish Widows reveals that over two thirds of divorcing couples fail to discuss pensions during settlements and, as a result, women are often left worse off when it comes to finances post-separation.
The study suggests that women are less likely to prepare adequately for retirement, with 52% of women surveyed having plans in place compared to 59% of men. Additionally, one out of four women have a smaller pension pot than their husband.
When it comes to divorce and separation, 48% of women reported that they did not know how pensions might be divided or distributed when a couple split, and 16% of women lost access to a pension pot when separating from their partner, while over a quarter of women who discussed pensions during divorce had no pension of their own.
Reflecting on the report, Retirement Expert at Scottish Widows Catherine Stewart said:
“Generally speaking women’s retirement prospects are worse than men’s. The persistent gender pay gap, maternity leave and career breaks can all hold back women’s earning potential and this often impacts pension savings.
“It is important that everyone – whether single, married or divorced – take steps to understand their finances and prepare for their independent future should a relationship break down. We would urge men and women to better understand the legalities around what happens to pension pots during divorce proceedings, as often they are the second largest, if not the largest asset a couple owns.”
The main issue regarding pensions and divorce is a lack of awareness – particularly in women – that pension pots can be treated as a significant asset and should be divided accordingly. And while pension sharing can often be fairly simple, some schemes can be very complex, and the advice of an experienced divorce solicitor is essential to help individuals ensure that they receive what they are entitled to during financial settlement negotiations.
It is easy to assume that a pension pot is not eligible to be shared if one partner has worked less than the other, or only one party has been contributing to it. However, when you set up a pension you do so as a way of protecting your future as a couple and a family, intending that the funds will go towards your shared retirement. But when a couple separates, one partner may end up with nothing to put towards their retirement as an individual, having replied upon their partner’s pension, or not being in a position to save for their own pension. In this way, the division of pension assets could be considered in a similar way to the division of property – if one partner worked to pay the mortgage while the other partner stayed home to look after children, the non-working spouse is still entitled to a portion of the property proceeds due to their contributions to the daily upkeep of the home and living situation. The same can be said of a pension, and it is only fair therefore that both spouses should benefit from a pension accrued from the time they spent together as partners.
Pension Sharing: Splitting the pension pot in two (not necessarily equal) portions so that each party receive a lump sum in the financial settlement.
Pension Offsetting: Balancing the pension value against another asset, such as property, so that each party receives an equal amount.
Pension Earmarking: Assigning a portion of a personal pension to the other party at a future date – i.e. when the pension holder retires – either in a lump sum or ongoing payment.
All these options can be discussed with a divorce solicitor or mediator, and the best solution decided upon by both spouses. Each case will be different, depending on what other assets there are to consider and what kind of pension has been taken out. It is always pertinent to seek professional financial advice from a solicitor before entering into an agreement about pension division.
Don’t disregard the potential assets locked into a pension and leave yourself without adequate support in retirement! To speak to an experienced family lawyer about divorce, pensions, property, spousal maintenance, children’s issues, financial settlements or any other legal issue relating to separation, contact us at www.franceslindsay.co.uk. Our friendly divorce solicitors are here to take the weight off your shoulders and find the most beneficial solution for your circumstances.divorce, divorce solicitor, financial planning, pension sharing, pensions, separation