This guidance update is an opportunity to refocus on the reality faced by many couples where there is disparity in pension wealth, and how pensions can, and should, play a key role in divorce financial settlements.
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 increased risk of poverty in retirement if the marriage ends.
Research shows that not discussing pensions in divorce could cost women, on average, up to £77k in today’s money at retirement.
Stowe Family Law, polled 400 women (aged 35 – 64 around the UK) on the increasing imbalance in the UK’s gender pensions gap. They found that over two thirds of those who divorced did not get a legal financial settlement and of those who did, 59% of women did not get a share of the other party’s pension, while 12% aren’t sure whether they did. (Please find below in bullet points further results from this survey.)
This needs to be addressed, and family lawyers at Stowe are adding their voice to calls to consider making pensions a compulsory part of financial proceedings, to ensure that individuals (whose focus is on immediate financial needs) do not miss out on significant sums from pension pots.
Stowe Family Law Partner Matthew Taylor says:“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 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.”
Stowe’s survey statistics:
Stowe’s survey explores women’s knowledge of their and their partners' pension, the importance of pension sharing if divorce happens, and what happened to their pension if their relationship has already ended.
Here are some key findings:
• 54% of women have a private pension. 46% do not.
• 70% of women don’t know the value of their pension
• The main reason for women not having a private pension, at 58%, is because they don’t earn enough, which 17% don’t have one because they don’t understand them
• A quarter of women do not know whether their spouse has a private pension, while 77% do not know the value of their spouse’s pension
• Over two thirds of those who divorced did not get a legal financial settlement
• As part of the financial settlement, 59% did not get a share of the other party’s pension, while 12% aren’t sure whether they did
• 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
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