By Fiona Tait, Technical Director, Intelligent Pensions
This state of affairs in 2017 is simply incredible. I accept that pensions are not a priority for many people - Scottish Widows found that divorcing couples were more likely to be concerned over custody of a pet than a pension – but if legal advice was taken the subject must at least have been raised.
Ever since the ex-wife of MP Sir Eldon Griffiths successfully sued her solicitor for ignoring his pension rights during their divorce (Griffiths versus Dawson 1993) it would be a brave solicitor who didn’t ask about it. Moreover, as a direct result of this case provisions in the Matrimonial Cause Act 1973 ensure that courts must have specific regard to pensions during a settlement hearing.
I can only assume that
• There are still a considerable number of negligent matrimonial solicitors in practice (unlikely), or
• Many of these divorces were carried out without legal advice (possible), or
• Divorce was actually raised but the parties to the divorce did not consider it important and then forgot about it (probable - the report was based on feedback from respondents rather than quantitative data)
If it is the latter, and I think it is, then something really needs to be done. Younger couples will naturally be focussed on the needs of any dependent children, but they are not the only ones getting divorced.
Although the number of divorces is falling in England & Wales, ONS figures show that the trend is reversed among older couples.
Over the last 40 years the number of divorces for men aged 55-59 has increased by 91%, and by 56% for the over 60s. This is an age when pension assets could be substantial and are often disproportionally split between the divorcing couple. Failing to discuss their husband’s pension during a divorce could mean that the chances of the ex-wife having adequate lifetime income could be fatally impacted.
Why it matters
Many women effectively rely on their partner for pension provision. 24% of the divorcees questioned in the Scottish Widows report had none of their own, and even when they do have their own pension the average amount saved is lower than that of men (£64k as opposed to £125K).
One clear reason for this is that women still tend to be paid less. Last week (10 November) also saw us reaching “Equal Pay Day” in the UK – the date from which, due to the gender pay gap, women are said to be effectively working for free until the end of the year.
The gap has fallen from 17.4% in 1997 to 9.1% in 2017 but it will always be present so long as more women than men take career breaks or reduce their working hours when they have a family.
The division of labour between wage-earner and home-maker in a marriage is both common and sensible so long as the family unit remains intact, but when there is a divorce there is a fundamental inequality which has to be addressed. Even if the unpaid spouse returns to full-time employment following a divorce their capacity to save for retirement is still constrained. Due to their broken employment record they are likely to:
• Return to a lower paid job
• Have a gap in their pension savings, if they have any to start with
• Have less time to save up before they reach retirement, particularly if they are already in their 50s or 60s
As a result they are never going to catch up with their partner’s pension provision based on their own efforts. Getting a share of their husband’s pension – either via an actual pension sharing order or via a monetary award of equal value – is essential to ensure women, or men, in this position do not lose out.
Scottish Widows suggests that including pensions in divorce proceedings should be compulsory, and ask for a government-led education campaign. Two good ideas, but meantime it is up to those of us in the financial services and legal professions to do their part and ensure divorcees appreciate the consequences of ignoring pension rights.
In Camille Grammer’s case taking care of this means that even if she manages to get through her $30 million fortune, she will still have a potential income for life when she reaches retirement age.
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