In our blog post of August 20, we commented on the financial problems that many women experience during retirement as a result of poor financial advice during and after divorce. Recent research by the pensions and insurance company Prudential has further highlighted the potential impact that divorce can have on retired women.
Many thousands of women are still being short-changed in their pensions and retirement income, despite new safeguards and changes in the law. However for many women these safeguards have come too late as they continue to struggle with the financial impact of their divorce.
Around 130,000 people got divorced in 2011 and of these, the women who took career breaks to look after their children are more likely to experience longer lasting-effects. Many women put their own savings and pension plans on hold in the belief that they will be provided for in retirement under their husband’s financial arrangements. Some women will have had no input whatsoever into major financial decisions made during their marriage.
Claire Moffat, a pensions specialist for Prudential says: “Women’s retirement incomes are particularly vulnerable to the financial effects of divorce. Many of them may be relying on their husband’s pension.”
Resolution, of which Dovetail Divorce are members, is an organisation of family lawyers and other professionals who work together on matters such as divorce.
Duane Plant, a Resolution solicitor who specialises in divorce, mediation and family law, said: “It is best not to consult just one financial adviser or one lawyer, but a combination of professionals for it to be a collaborative effort.”
A pension can be one of the biggest assets that needs to be divided up during divorce, often proving to be difficult to put a value on. Settling pensions in divorce can be carried out in three ways: an attachment gives a spouse an agreed percentage of their ex’s pension income once it is paid out, however the husband die or the ex-wife should remarry, her right to the pension income will be lost. ‘Offsetting’ is used more often and in this case a spouse with a generous pension will keep it but the other ex-partner is compensated in another way, for example with a larger share of the family home. The third option is pension sharing where a spouse can claim a portion of the pension and move it to their own pension scheme.
Despite the complexity of dividing pensions, one in five women still attempts to handle their own divorce settlement and only one in ten retain any rights to their ex-husband’s pension. Marta Philips from The Pensions Advisory Service said: “Someone might think they are getting half of the income from a pension but what they inherit is a fund they will need to contribute to an eventually derive an income from.”