Experts say that divorce settlements must change to make pension-sharing fairer
Posted on 4th October 2021
New research from experts highlights the gender gap in pension wealth, and the need for change in divorce settlements. Read more here.
Worrying new data from The University of Manchester have exposed large gaps in pension wealth between men and women.
The data has revealed that men aged between 65 and 69 have a shocking 6 times the pension amount of their partners, standing at an average of over £212,000 compared with £35,000 for women.
What is the law on pensions in a divorce?
Since 2000, the law has stated that pensions can be divided and shared during a divorce. However, it has recently been revealed that this is only the case in around 12% of divorces, with the majority of couples keeping their own pension funds.
This means that the person with the larger pension out of the couple wishes to keep this for themselves, rather than to share with their former spouse as an asset in the divorce.
Why do more people not share their pensions in the divorce?
Previous research has shown that many people, and especially men, are very emotionally attached to their pensions and have strong beliefs about their right to keep the money. Because of this, it is not uncommon for our divorce solicitors to be instructed by women involved in the divorce to allow for the pensions to be left out of the divorce proceedings. This is because, as our Family Law solicitors know, most of our clients wish for the divorce proceedings to go as smoothly, and as stress-free as possible.
A representative from the Pensions Policy Institute recently spoke on this idea, stating that many women have an idea of a trade-off between the house and the pension in a divorce, and fight instead to keep the family home rather than looking more into the overall value of the pension.
What happens to my pension when I get a divorce?
As previously mentioned, since 2000, pensions have essentially been considered assets in divorces, and should be handled accordingly as just this. When divorce proceedings begin, our divorce solicitors insist that a full valuing of the pensions of both parties are conducted, in order to allow the necessary actions to be taken as to how they should be dealt with best. See a full overview of these options here.
This could be:
A Pension Sharing Order- where a portion of one spouse’s pension is transferred to the other
Deferred Pension Sharing Order- this is a similar option, but defers the transferring until the other spouse is at the age of retirement
Offsetting- the pension holder is able to keep the entire pension fund, and instead gives their spouse a greater share of other assets
Deferred Lump Sum Order- the other spouse receives a lump sum at the date at which the pension is released
Whether to take the house or the pension in the divorce:
As previously mentioned, one of the common forms of ‘clean break’ divorces that our specialist divorce solicitors come across is when one party, usually the woman, opts to ignore their partner’s pension, and in return is able to keep the family home or property that the couple have lived in together.
A ‘clean break’ divorce in this way is a popular option, meaning that after the divorce each person’s finances are entirely separate from one another, removing the need for future negotiations and preventing the prospect of future financial claims.
However, when these divorces are being completed, it is important that each party has the assistance of a specialist divorce solicitor to ensure that the permanent division of the assets is fair, and that both parties are fully aware of the long-term financial impact of their decision.
For example, our specialist divorce solicitors often find that the spouse in the weaker financial position focuses their energy on keeping the marital home as a sense of stability and security to have the property forever. However, in doing so, they often agree to give up any right to the pension of their partner.
In reality, if not properly thought through financially, this decision can lead to this person experiencing financial trouble in retirement age, or not being able to retire until much later than they otherwise would.
Our divorce solicitors are all too aware of how common this issue is, and always offer tailored advice to our clients as to whether a divorce settlement idea has the potential to cause future financial problems in this way.
Clean break divorce settlements are advantageous in many ways, when done correctly, and are the best way to finalise all aspects of the divorce and prevent any need for further interaction or discussion between spouses. However, the potential for scenarios such as that discussed above, where one party runs into financial trouble in the long run due to making a decision to keep the property many years earlier, is just one example of how ‘clean break’ divorce settlements can go wrong, and why it is so important to seek the assistance of a specialist divorce solicitor.
For more information on the different financial options in a divorce, see these here.
Contact our specialist divorce solicitors today:
If you are looking for legal advice, or legal representation regarding your divorce proceedings, or the financial arrangements of your divorce, then do not hesitate to get in touch with MG Legal’s divorce solicitors today, here, or give us a call on 01772 783314 .
For a full overview of the services that our divorce solicitors offer, see this here, and for all of our fixed-fee prices, see this here.
Our team are here for you, and will act with patience, sympathy and compassion with your divorce proceedings, while ensuring that you achieve the best outcome possible.
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