A recent report has revealed the huge gap in pension wealth between men and women, highlighting the urgent need for divorce settlements to be fairer on the issue of pension sharing.
Findings suggest that married men aged between 65 and 69, have six times the pension wealth of their partners, while those aged between 55 and 64, have three times the wealth of married women in the same age group. Even among married men aged 45 to 54 (the most likely age group to divorce), men had accumulated around £86,000, compared with £40,000 for married women.
The report was compiled by the Manchester Institute for Collaborative Research on Ageing and the Pensions Policy Institute, drawing upon data from the wealth and assets survey published by the Office for National Statistics.
In 2000, new legislation was passed, allowing pensions to be shared by divorcing couples. Despite this, recent data suggests only 12% of divorces result in any pension sharing. During the emotional challenges of separation and divorce, women are often more focused on keeping their homes and children. In contrast, husbands are protective of their pensions and rarely wish them to be shared as an asset in divorce.
Owing to the complexity of pensions, it is often necessary to pay for expert legal and financial advice to get a fair value of their worth at retirement. This often deters couples from exploring pension sharing. Often a woman will feel if she trades the house for the pension, she has got a good deal. However, without even assessing the ultimate value of any pensions, it can lead to an impoverished retirement for one half of the couple, usually the woman.
This is why we always advise couples to consider both current and future housing needs, income requirements and pensions, to ensure a fair financial settlement. If appropriate, we will always advise couples to use a pensions expert to value the pension assets and explore the most tax efficient way of dividing the pensions to achieve equality of income at retirement. The cost of such a report will usually be money well spent. We are used to working alongside financial and pension experts and can recommend trusted professionals, if required.
Given the complex nature of pensions, it is important for separating and divorcing couples to seek early advice from a family solicitor. This will allow them to explore the best way in which to address any pension assets and decide if an expert pension report should be obtained.
This short 3-minute video produced by the University of Manchester, Cognitive Media, ESRC offers a simple explanation on pensions and divorce.
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