When it comes to dividing assets on divorce, your clients will likely consider everything from their family home to their photo albums and Blu-ray collection.
However, new research has found that only a minority of separating couples even consider dividing what could be their most valuable marital asset – their pensions.
Read more about this worrying research, and why clients failing to split pension wealth could cost them dear in later life.
7 in 10 divorcees don’t share their pensions when they separate
Since 2000, divorcing couples have been able to obtain a Pension Sharing order from the court. This can ensure a fair split of pension assets, enabling a potentially fairer financial settlement after a separation.
However, new research published by the Telegraph shows that many people don’t realise that pension sharing is an option or, if they do, they simply don’t consider pensions as marital assets when they split.
The survey found that 7 in 10 divorcees don’t share pensions, while around 1 in 5 people admitted they had not even considered dividing pension wealth during divorce proceedings.
While these are worryingly low numbers, as you recently read, there is also concern that the new “no-fault” divorce laws could undermine the sharing of pensions on divorce yet further.
Recent data published by Your Money shows that the number of divorcing couples who applied for Pension Sharing orders has fallen 35% since 2017, from 36,202 five years ago to 23,622 in 2021.
A failure to split pensions can have a devastating effect on women in later life
In recent years there have been many pieces of research that show how failing to split pension wealth on divorce can have a long-lasting effect on women.
A gender pensions gap already exists thanks to a combination of women typically earning less over their lifetime and taking time out to care for children. Failing to split this important marital asset on divorce makes this issue much worse.
You’ve previously read about research from The University of Manchester that revealed men have substantially more private pension wealth than women.
For example, for those aged 65 to 69, median pension wealth for men is just over £212,000 compared to just £35,000 for women.
Defined benefit pensions can be particularly valuable
If your clients are divorcing and the parties have defined benefit (also known as “final salary”) pensions, these can be particularly valuable.
These gold-plated schemes can have significant value, especially if one of the parties has been a member of the scheme for a long time.
If you have clients who are separating, we can help to obtain “cash equivalent transfer values” of these pensions. The key benefit of this is that both spouses can be made aware of just how valuable such a pension is, and why it’s so important that it’s considered alongside other marital assets when a settlement is reached.
For more than 20 years we have been working with legal professionals to produce Pension Sharing reports and to help divorcing couples to understand the value of pension benefits. As a Pensions on Divorce Expert (PODE) we’re ideally placed to assist your divorcing clients when it comes to sharing pension assets.
Read out three-part series about “pensions on divorce” for more useful tips and guidance:
- Pensions and divorce: Before the decree absolute
- Pensions and divorce: After the decree absolute – what’s next?
- Pensions and divorce: 5 pitfalls to avoid when implementing a pension share
You can also watch our webinar series, which includes helpful guidance about valuing pensions, Lifetime Allowance issues, offsetting, and practical information about how to obtain a Pension Sharing report quickly.
Get in touch
If you have clients going through a divorce, and you want to ensure that any pension assets are shared fairly, we can help.
We can also provide ongoing financial advice to any individuals looking for guidance on managing their wealth post-divorce.
To find out more, or if you are interested in working more closely with BlueSKY, email firstname.lastname@example.org or call us on 0118 987 6655.