If you are going through a divorce or dissolution of civil partnership, you will no doubt be thinking about your financial future and how the assets you have built up as a couple will be divided. One of the biggest assets, especially if you are divorcing later in life, is likely to be your pensions, and whilst they are a marital asset and assets should generally be split equally, many couples do not discuss pensions and they are often not considered properly – unless a professional becomes involved in the divorce or dissolution.
A recent study carried out by the Pensions Policy Institute (PPI) and the University of Manchester shows that, despite a change to the law in 2000 allowing pensions to be shared on divorce (this can only be done with a court order), statistics show that by 2019 only around 12% of divorces resulted in some sort of pension sharing. This could be because it appears that men seem to be more attached to their pension and women to the house, so women have a tendency to accept the house instead of a share of the pension. Or, it could simply be because the couple is happy to accept the easiest and fastest way out of a marriage – especially if they want to keep the divorce as amicable as possible and there are children involved. Whatever the reason, the value of a pension can be considerable and not taking it into consideration could be a mistake.
Some of the findings in the PPI report are that:
- men have more private pension wealth than women and at the age of 65 – 69 the median pension wealth for men is around £212,000, whereas or women it is £35,000
- the median pension for divorced men aged 45 – 54 who are not cohabiting is £42,000, compared with £16,000 for women in the same group
- in the age group 55 – 64, the disparity raises to £100,000 for divorced men and only £19,000 for divorce women
- divorced women in their 60’s who are not cohabiting have pension wealth 30% lower than the same group of men
- one partner has 90% of pension wealth in half of couples where both of them have pensions
- only 15% of all couples have equal pension wealth
It is clear to see from these figures that divorced women are at a potential disadvantage, and the report suggests that those with children are at particular risk.
In England and Wales, it is the total pension each partner has built up that is taken into account when deciding on whether and how a pension is going to be divided. That includes pensions that were built up before marriage or civil partnership – but not state pensions (Please remember – this may be different if you were already receiving your state pension when you divorced and you reached state pension age before 6 April 2016. In this case, any additional pension built up under the old pension scheme may have been shared. Our mediators are trained to deal with divorce and dissolution of civil partnerships later in life, so please ask for further advice on this.)
Now, it appears there may be further implications for divorced women as, following the discovery that some divorcees have been underpaid up to £60,000 in state pension, former pensions minister, Steve Webb, has asked the DWP to include divorced women (who were previously excluded) in its current state pension correction exercise.
The state pension correction exercise came about because it was discovered that some people were not paid the larger state pension they were entitled to, based on their spouse or civil partner’s national insurance record and the date they reached state pension age. Typically, this affects women born before April 1953, who may be able to claim around 60% of their partner’s basic state pension if they made a claim before March 2008. After that date, the process should have happened automatically, but this appears not to have been the case in all instances and the automatic process may not have worked. Divorced women were originally excluded as the DWP believed that there were no ‘significant errors’ in this group.
Mr Webb has suggested that:
- according to DWP figures (published in October 2021) 720,000 divorced women receive the old state pension (pre 2016)
- 40,000 of these are not getting the standard married women’s rate according to the same figures
- over 100,000 cases may need checking
- growing numbers of cases where divorced women have been underpaid have been identified
Ensuring that you understand all of your options upon divorce is vital if you wish to achieve a fair division of assets.
More information about sharing a pension after divorce or dissolution of a civil partnership is in our article here. Family Matters’ mediators are trained in all issues relating to pensions and understand the importance of ensuring that both people coming to mediation and reaching agreement understand the potential implications of all options when it comes to pension sharing. When an agreement has been reached through mediation, both people receive a memorandum of understanding explaining the reasons for the decisions made and an open financial statement, which identifies all the assets that have been discussed and the documentation that supports this. The process of sharing financial information in mediation is exactly the same as the process of sharing information in the court process. If you have a legal advisor, you can then take this agreement to them to be made into a legally binding court order. If you don’t agree your financial situation, including your pension split in advance, a court will make the decision for you.
Coming to Family Matters to make financial decisions about pensions following separation means that you will be working with mediators who understand that pensions are complicated and that any decisions made will affect your financial security, now and in the future. Make an appointment to see one of our trained mediators here.