Divorce after 50: how to protect your client’s retirement
Divorce is never easy, but it can be especially challenging for older couples. Not only are they dealing with the emotional and legal aspects of ending their marriage; they need to consider the financial complexities of dividing their assets too.
According to our research, one in three divorces happen after the age of 50. This means more people retiring as divorcees – and they need to plan accordingly.
For some mortgage-free couples, their home will be their largest and most obvious asset to split during a divorce. But in some cases, one partner may want to stay in the family home. This is where unlocking equity could be beneficial, especially when considering the cost of selling up and buying two new properties.
The next largest asset for couples is pensions. Because pensions are never in joint names, they can be overlooked as an asset to apportion. According to our research, only 11% of divorcees over 50 took pensions into account.
There are several financial solutions couples can consider, depending on their circumstances and preferences. These are some of the common ones.
- Equity release. Your clients could use a lifetime mortgage to unlock some of the value in their home to avoid having to sell up. The lump sum secured against their property could go to their ex-spouse to buy another property or be used to cover the costs of divorce or to supplement their lifestyle.
- Pension sharing. This can help achieve a fair and balanced settlement. One of the parties could transfer a percentage of their pension to their ex-spouse or receive a percentage in their own scheme. Depending on your client’s age, they could use their pension settlement to purchase a fixed term annuity. This could help to bridge any gaps in income until other sources of income start, such as the state pension or any defined benefit pensions. Pensions are complex and sensitive to changes in financial markets, so your clients should get advice if they’re considering this option.
- Savings and investments. These are usually easier to split than property and pensions, as they can be sold or transferred without much hassle. Your clients could divide them equally, or negotiate a different ratio based on the needs and contributions of each party. It’s important your clients are aware of any tax implications before making these decisions.
The value of advice
Only 7% of divorcing couples sought financial advice. As an adviser, you can help both parties take a view of their assets before coming to a financial agreement. Thanks to you, clients can compare and evaluate the different options available to them. And you can help them understand the impact these decisions will have on their retirement and financial futures.
Our range of over 50s mortgages and guaranteed income retirement products can help your clients achieve financial independence following their divorce. And our sales aids and product specs make it easy for you to discuss them with your clients.