Tens of thousands of women miss out on more than £1bn every year by failing to split pensions during their divorce.
The stresses and strains of the festive period push couples to breaking point each year, with the first working Monday of the year dubbed “divorce day”. Working from home guidance and other social restrictions will add even more pressure to already taut relationships, prompting the final split.
Each year, it is estimated that more than 15,400 women fail to split their husbands’ pensions, worth £130,000 on average, according to Hymans Robertson, a consultancy. Experts have warned that many of these women risk falling into poverty in retirement even if they secure the family home.
There are 110,000 divorces a year in the UK. Research group NimbleFins found that 28pc omit pensions entirely. Pensions should always be included in the financial settlement of any divorce as they are typically a household’s second-biggest asset, after property. However, the courts handed down the fewest pension-sharing orders in more than a decade last year.
Nearly half of divorced people admitted to not discussing pensions during their proceedings, according to the Great British Retirement Survey run by stockbroker Interactive Investor.
Ann Eaves, 65, from Glasgow, said she “bitterly resents” the outcome of her divorce 20 years ago as she didn’t get any of her ex-husband’s pension.
“I’m furious. I was married to a very clever chartered accountant and I was naive. He wrote up the settlement agreement to suit himself,” she said.
Ms Eaves didn’t realise the impact it would have later in life until years afterwards. “I’m living with the consequences of it now and it has more or less destroyed my life. You don’t consider your pension when you are younger.”
Kathryn Fleming, of Hymans Robertson, said: “The financial deck is already stacked against women due to pay gaps, part-time working and carer responsibilities. This creates a perfect storm where they are more likely to reach retirement with less than half the retirement assets of their male counterparts.”
Women are also likely to live two to three years longer than men on average, and more likely to have to pay for care. This means any loss of entitlement to pension income could leave thousands of women facing poverty in their later years, Ms Fleming said.
Women’s pensions have become £183,936 smaller than men’s on average by retirement age, a report by lender More2life and the Centre for Economics and Business Research think tank found.
Rebecca O’Connor, of Interactive Investor, said: “Often, women will choose to take the home and will let their ex-husband keep the pension. At the time, this might seem like an advantageous split, but when it comes to retirement income, the partner who took the property rather than the pension has no income to live on, even though they have a house to live in. They might end up having to sell the house to generate income.”
The courts split pensions in three ways. The first is known as “pension sharing”, where retirement savings are split immediately, which is the most common way of reaching a settlement. Menna Cule, of Brewin Dolphin, the financial adviser, said this was the preferred way as people should achieve a clean break so they are not tethered to their partner for ever.
The second option is called “pension offsetting”, which sees the pension’s value offset against other assets of a similar value. The final method is called “pension earmarking”, or “attachment”, where the claimant would not receive any money immediately but when their spouse started to draw their retirement money, part of which would be paid to them.
