According to research from the Office for National Statistics (ONS), divorce, and divorce among couples in later life, is increasing in the UK.
If clients get divorced in later life it can have a huge impact on their finances, particularly once someone reaches retirement age. And research from Legal & General has revealed that many people simply don’t fully consider assets such as pensions when they go through a divorce.
The L&G study found that just 12% consider pensions when dividing assets with their partners, and 24% actively waive their rights to the value of them.
While your clients might not be sharing a $148 billion fortune – as older divorcees Bill and Melinda Gates are – taking financial advice on divorce can be hugely important.
Covid-19 also creating a strain on many relationships
According to the ONS, there were 107,599 divorces of opposite-sex couples in 2019, increasing by 18.4% from 90,871 in 2018.
This figure could be set to rise further. Citizens Advice say the pandemic has created a huge strain on relationships, with views of its divorce webpage increasing by a quarter in the first weekend of September 2020 compared with the same month a year earlier.
If your older clients are looking to separate, financial planners can play a key role in helping to ensure assets are fairly divided. We can also help client to see what their future might look like, share pensions, and ensure they get the most from all their assets.
Clients 4 times more likely to seek advice from friends than a financial planner
Legal & General Financial Advice recently discovered that more than one-third (38%) of over-50s consider their divorce to be financially unfair.
However, just 3% of people seek financial advice when going through the process. Those over 50 are four times as likely to seek advice from friends when going through a divorce as they are from a financial planner.
Not speaking to an expert can have significant financial implications, particularly for women. You will no doubt have met clients who didn’t even want to consider pensions when splitting assets, perhaps preferring to concentrate on more emotional matters such as the family home.
However, this can leave divorcees with a significant financial shortfall in later life. Planners are here to ensure that both parties can achieve a fair outcome, and that assets are distributed fairly.
We’ve spoken at length about this in our recent three-part “Essential Guide to Pensions and Divorce” series:
- Part 1: Before the decree absolute
- Part 2: After the decree absolute – what’s next?
- Part 3: 5 pitfalls to avoid when implementing a pension share
In our experience, clients going through a divorce benefit from speaking to a financial planner early in the process.
For example, we can help clients to identify a new pension scheme before the decree absolute has been granted. We can also identify whether any extraneous actions need to be taken – for example, drawing down on a pension to assist with the purchase of a new property.
As Sara McLeish, chief executive of Legal & General financial advice, says: “We cannot underestimate the strain caused by divorce, but effective financial planning, tackling the burnout and working closely with a network of solicitors can support both parties to make the right decisions and allow them to embrace their fresh start on an equal footing.”
Financial advice also helps happy couples
While financial planning can add value to divorcing couples, we also find that preparing couples who are happy can be useful should they separate in the future.
For example, providing joint financial advice to a couple can make them both aware of the overarching value of their assets, and the importance of their pensions.
If we can have “what if?” conversations with clients early on, it can help separating couples to come up with a more equitable split further down the line.
An important part of financial planning is helping clients to understand that there are life events that can throw their best laid plans off course. These might include illness, redundancy or, of course, divorce.
As part of our work with couples, we help them to prepare for the unexpected. While a potential future divorce might be a tricky conversation to have, it’s important to consider it. Not doing so could leave older couples struggling financially in the future.
Get in touch
We work closely with many solicitors to provide advice to clients considering or going through a divorce. To find out how we can help you and your clients, email firstname.lastname@example.org or call us on 01189 876655.