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Divorce can be a costly exercise, especially if a couple have multiple financial assets to consider as they approach retirement. It’s often women who feel the financial burden from a later life divorce.
Research from 1984 showed that almost half (49%) of the UK population thought that a woman’s ‘place’ was to look after the home and family1. Fortunately, attitudes to women in the workforce have changed drastically since then.
In 2022, the number of women in employment in the UK reached a record high of 72.2%, compared to 79% of men2; a figure that was just 52.8% when records began in 19713. Despite this progress, the gender pay gap remains a vast 15.4%, with the gap at its widest for women over 403.
Beyond the gender pay gap and the glass ceiling, social inequality has had a lasting effect on the finances of women, especially mothers. Women who take time out of work to raise children, not only have less financial independence as a result, but also face more barriers when returning to work, because of a perceived skills gap, a changing environment and prejudice.
For women who divorce in later life, this inequality is amplified, as they often absorb most of the financial risk.
On average, a woman now in her 60s will retire with approximately £51,000 of savings. By comparison, men of this age group will retire on average with the more comfortable sum of £156,000 – triple the wealth4. For a divorced woman, these savings are halved, falling to just £26,1004.
Despite the inequalities women face as a result of financial sacrifices they have endured, almost a quarter of women still choose to waive their rights to their partner’s pension as part of a divorce settlement5. For women who divorce in their 60s, this figure increased to 31%, despite having less time to make up for any shortfall they might experience in income6.
Only 3% of people seek financial advice when going through a divorce process, but advisers play an essential role in helping a couple find financial fairness6. This support can be particularly beneficial to women, 31% of whom said they were financially worse off in the year following their divorce, compared to just 20% of men6.
The earlier an adviser can be involved in divorce proceedings, the more value they can add. A solicitor can provide a referral to a divorcing client, so the adviser can engage at a stage where they can help the woman build a stable financial future.
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Divorce can take a significant emotional toll on clients. An adviser must be sensitive and empathetic to the specific needs and circumstances of each individual client, while providing clear explanations and rationale about the advice process.
Tackle the taboo around pension splitting and sharing options, by having open and honest discussions with your client. Understand their unique financial situation and help them visualise the long-term financial impact of their financial decisions.
One option to divide assets in divorce is a pension sharing order, where pension assets are split between the partners on a basis decided by a court. This creates a pension debit against the member’s pension benefits, matched by a pension credit for their partner.
Another option is pension offsetting, where one partner keeps their pension benefits, which means the other is entitled to a greater share of the couple’s remaining assets. Typically, the pension is offset against the value of the family home.
Finding finance fairness: supporting women in later life divorce PDF size: 1.24MB
We specialise in helping advisers support their clients to achieve their financial goals in retirement.
If you’d like to discuss how you can support your client during a later life divorce, please contact your account manager.
1 ONS (2019) Women’s labour market participation – Long-term trends in UK employment: 1861 to 2018
2 UK employment rate by gender UK 2022 | Statista
3 Catalyst Research (2020) Women in the Workforce – UK
4 ONS (2022) Gender pay gap in the UK: 2022
5 This is MONEY Divorced women reach retirement with just £26,100
6 Opinium Research ran a series of online interviews among a nationally representative panel of 2,008 UK adults aged 50+ who are divorced, from 19 to 23 September 2020
More retirees than ever are choosing to separate in later life, which can have a huge impact on financial wellbeing. We explain how advisers can support clients through the divorce process and help them reach the best outcomes to embrace a fresh start.
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We talked to pensions and divorce expert Debora Price, Professor of Social Gerontology. She’ll help us explore why pensions can be so challenging when people are divorcing and how you can help them make better decisions.
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