Family lawyers call for pensions to be a compulsory part of divorce proceedings as full-scale of pension disparity revealed
The Pensions and Lifetime Savings Association (PLSA) has updated their guidance on pension sharing for private occupational pension schemes that advise clients going through divorce.
For many couples, there is considerable disparity in pension wealth. In around half of couples, 90% of the pension wealth is held by one partner, usually the husband, leaving women at a financial disadvantage and an increased risk of poverty in retirement if the marriage ends.
Research shows that failure to include pensions in divorce discussions could cost women, on average, up to £77k when they reach retirement.
Stowe Family Law, polled 400 women around the UK (aged 35 – 64) on the increasing imbalance in the gender pensions gap. They found that over two-thirds of those who got divorced did not get a legal financial settlement. Of those who did get a financial settlement, 59% of women did not get a share of the other party's pension. A further 12% didn't know whether they did.
The family lawyers at Stowe are adding their voice to calls to consider making pensions a compulsory part of financial proceedings, to ensure that individuals do not miss out on significant sums from pension pots.
"The updated PLSA guidance on pension sharing on divorce provides further welcome clarity to what can be a complex area.
Dealing fairly with pensions on divorce remains an often overlooked area for separating couples, with those who attempt a DIY divorce most likely to run into problems. Only 12% of financial orders on divorce contain a pension sharing order, and it remains all-too-common for parties, usually the wife, to ignore claims against their spouse's pension or forego claims due to a desire to retain the family home.
While this can be a sensible approach, many fail to understand the true value of the pension share they are giving up, and women are at risk of trading a long-term guaranteed income for short-term stability.
The average disparity between men's and women's pension assets is 56%, primarily due to higher rates of part-time work for women and the gender pay gap. This leaves women getting divorced facing significant financial disadvantage if they do not bring any pensions into consideration.
Divorcing parties must ensure they educate themselves on their financial claims following divorce and take advice – both legal and financial – to ensure they are considering not just their current financial position, but what the future will look for them over the medium and long term. It is high time that pension sharing orders became a central part of these conversations." Matthew Taylor, partner at Stowe Family Law
Stowe's survey findings
Stowe's survey explored women's knowledge about what happens to their and their partner's pension when they get divorced. The key findings were:
- Only 54% of women have a private pension
- 70% of women don't know the value of their pension
- 58% of women who don't have a pension do not have one because they don’t earn enough
- 17% of women who don't have a pension do not have one because they don't understand pensions
- A quarter of women do not know whether their spouse has a private pension
- 77% of women do not know the value of their spouse's pension
- Over two-thirds of women who divorced did not get a legal financial settlement
- 59% did not get a share of the other party's pension as part of the financial settlement
- 42% of women don't think it's very important to receive a share of their spouse’s pension as part of the financial settlement in a divorce
- Half of women aren't convinced that they would consider their pensions as an important factor in their financial settlement
Copyright 2024. Post made possible by Clare Longhurst, director Clare's PR