A Little Bit Richer

James: This series is brought to you by L&G, helping you build a future that's a little bit richer.

Iona Bain: Hello, I'm Iona Bain, and welcome to A Little Bit Richer, brought to you by legal in general. January is a month which does see an increase in people looking to divorce. Ending a marriage and facing the financial reality of a recent separation is a difficult process. So, today we want to reassure you that you don't have to have everything figured out at once. Divorce isn't linear. It's emotional, it's messy, and it can be expensive, but we're going to share practical steps that you can take to protect your future. Joining me today is friend of the show, Jenny Hazan, who leads a team at L&G, focused on supporting people to build long- term financial wellbeing.

Jenny went through a divorce herself a few years ago and understands firsthand the emotional and financial complexities that come with it. So, whether you're currently navigating a breakup, supporting a friend through one, or simply want to understand what your rights and options are, we've got buckets of knowledge for you today. Hello, Jenny.

Jenny Hazan: Hi.

Iona Bain: Before we dive into the subject, can you share your story with us?

Jenny Hazan: Yeah, absolutely. So, I actually went through my own divorce about four years ago now, luckily, relatively amicably. But I think any point where you go from a we to a me is a massive life shift. And so, for me, looking back, actually there's so many things that I wish I had known at the time, areas that I had to scrabble around for information that I wish was clearer. And then from a day- to- day perspective, what I do for work, I really look at how people think and feel when it comes to money and their future. So, that gives me a little bit more insight, I guess, into what we're thinking and feeling when big changes happen and when we're trying to re- look at our finances.

So, I'm hoping I can bring together a little bit of that personal experience and also that insight through the work that I do to help anyone who is potentially looking at a divorce right now, separating, even a big breakup actually, because I think it's just as relevant in that situation. And then actually anyone who's still in a loving partnership or looking for a partner and really wants to think about the sorts of conversations that we should be having about money no matter what.

Iona Bain: Mm- hmm. Well, I'm sure your insight is going to be incredibly helpful here. And you've given us a glimpse into how emotionally and financially difficult divorce can be. What areas of people's lives does divorce have the greatest impact, do you think?

Jenny Hazan: Well, I always say that divorce is actually two breakups. So, the first is with the person, and the second is a breakup really with the future that you were creating together. So, the emotional bit really hits first. It's the change in your normal day- to- day life. It's the change in what you expected your future to look like. It's even the mental load of having to make big decisions on your own, and particularly at a time when you are having to make some really big decisions. But for me, what was really, really hard was actually I met my ex- partner when I was 18 years old. And so, then when we separated, I had to learn how to trust myself in a new way that I hadn't done before.

So, emotionally, it takes a big toll, but it can also feel weirdly quite exciting as well, fresh chapter. From a financial perspective, I think one of the biggest shocks is really around housing costs and bills. So, your rent, your mortgage, your utilities, and this is something that we sometimes call the singles tax. And of course that is not a real tax, but it feels like one when suddenly overnight your costs can even double sometimes. And that's before you even think about the cost of the divorce itself. So, even if you're on good terms, if it's amicable, there are costs to divorce. And if you can't agree on how to split your money, your assets, et cetera, those costs can increase considerably quite quickly.

Iona Bain: Do you have any advice for someone who might be in that situation right now and they're wondering, how do I do this on my own?

Jenny Hazan: Yeah. Well, the first thing is to give yourself a little bit of grace. And the second is to know that you can start small. So, three things that I would say that everyone can start is firstly, know your numbers. So, what's going in, what's going out. It doesn't have to be some sort of epic Excel wizardry, but just understanding your money. The second thing is to build a small buffer. So, we're talking 10 pounds a week, five pounds a week even, something that gives you a habit really in terms of rebuilding up that emergency savings. And to be honest, it's less about the actual figure. It's more about giving yourself a feeling of, " You know what? I've got this."

Iona Bain: Yeah.

Jenny Hazan: And then the third thing, which I think is really important and often overlooked is actually realigning how you spend with the life you have now, not the life you had before. And I think it's important to say that we often talk about divorce and it feels very depressing, but I also think it opens a new chapter for people and it gives you the ability to choose for yourself without actually having to make some of those compromises about what you want your life to look like. So, it is important to consider that.

Iona Bain: Yes. I'm glad that we're focusing as much on how we can make the most of life after divorce…

Jenny Hazan: Absolutely.

Iona Bain: ... as much as we're talking about the financial challenges that come about. Pensions are often mentioned as a forgotten asset during divorce. Why is that? And what do people need to be aware of?

Jenny Hazan: Well, honestly, when you're going through a divorce or even a big breakup, no one is sat there thinking, " I wonder what my pension will be when I'm 60 years old. Will that help me live the life that I want to have?" And what's really important here is the pension is often the second- biggest asset that you have, or you have collectively between you and your partner. And it is often forgotten because it seems like it's very much far in the distance. I don't need to think about all these complex things right now.

I'm just trying to deal with your emotional load and maybe some of the more day- to- day visible financial needs, but the pension should be included as part of the discussion around your joint finances. I think often people look at the number that is today and they don't actually think about how that pension might grow over time. And so, it's really important just to start off with, do you actually know what each other's pension assets look like and are you including them in the discussion? And all of this is really about setting a fair basis for how you are going to divide those assets, which is particularly important for women who often end up having a pension gap with their male counterparts.

Iona Bain: And is that because that's not something that women always realize is going to turn into a problem further down the line?

Jenny Hazan: So, there's a number of reasons. And the first one really is that often on average, we see women tend to take more career breaks or working part- time, often aligned with childcare or even caring responsibilities in general. Often, women are earning less. So, they're in lower paid roles. They hold less senior positions. So, their contributions in the first place were lower and over time that can compound quite considerably to be a big drop in comparison to a male counterpart is that consistency of paying into your pension is a critical element or were they thinking that they might be able to share in their partner's pension?

Well, yes, because ultimately you're building a partnership and you're building a family perhaps. And so, you are looking at joint assets. And that is why it's so important that when we talk about divorce, that again, we're looking at all of these assets and making sure that we are dividing them fairly. One in three, people don't actually even review the pension as part of that discussion. One in five actively opt out of taking a share in their partner's pension. And look, every single circumstance is different, but ultimately, if you don't actually even understand what each other's got, it's going to make it really, really hard to make that fair.

And what we often see is actually later on down the line is when people suddenly realize, women especially, that they may have less than they were expecting in retirement. That might be because they've looked at the assets and said, " You know what? I'll stick with the family home, particularly if they've got kids because that feels safer." And during a divorce, often what you crave is security, safety, a baseline, and that can trigger us to make decisions that really play into that.

And that's not wrong, but it can lead to us not really realizing the longer term impact of the choices that we're making and really having some support, advice, guidance in that space is really, really critical to make sure that you don't regret it later on.

Iona Bain: Absolutely. And this seems to be a problem with not including women enough in the conversation. So, to be clear, it's not necessarily your fault if you've not been involved in your husband's financial planning up to now, maybe you've not been asked in, but what you can do is at this point now say, " Yeah, let's have that conversation. I want to know what we've got and what we can do to make it fair." And that's well within your rights to do that.

Jenny Hazan: Yeah, absolutely. That knowing your numbers piece is critical, but it's never too late. So, I think sometimes people think, " Oh, I haven't done that up until now." And now I'm at a point where maybe it is less friendly. Maybe there is now a lot between you and your ex- partner that makes it difficult to have these conversations. And I think what we often hear from financial advisors is maybe the couple will come to the first session together to talk about finances, but in follow- up sessions, actually it tends to be more likely one partner. And then over time, that means your knowledge starts to shift and go.

Iona Bain: So, you've talked a bit about getting support and advice. What kinds of support should people be thinking about at this time?

Jenny Hazan: I think it is a really big time of change and no one should have to go through a divorce on their own. So, emotional support is really important, be that from a friend, a coach, a therapist, someone that can just give you the space when it's really noisy. We underestimate, I think, how much is just going on for us internally that we need an opportunity to take a step back, particularly because we will be making very big decisions. The second one is around legal support.

So, often people worry, I think about costs of legal fees, et cetera, but even having a short introductory conversation with a solicitor or even a mediator who can just really help you to understand what your rights are and also what does a fair settlement look like. And I think that brings a lot of peace of mind just knowing because the unknown is the bit that often causes us a lot of internal turmoil really. And then finally, we've been talking about financial advice. When you look at getting divorced, money can get complex. Pensions and sharing them can get complex. And I think this is the area where it's really important to have professional advice.

Our natural instinct is to turn to friends and family, and there is nothing wrong with that. In fact, I absolutely loved my friends and family for all of the support they gave me, but financial advice and really trying to help me understand how the finances would be breaking down and what that would mean for me today, but also what that would mean for my future and how I would then rebuild those finances with a professional advisor who are there to help you really figure out, okay, today this is a good choice for me to do X, Y, Z. Am I going to have enough in the short term, the medium term, the long term, and how do I get back on track with my goals?

 And that includes any assets or income or savings that you might get as part of the divorce, what you're going to do with them next to build up that next chapter of life.

Iona Bain: Mm- hmm. And it sounds like having a dispassionate person involved in that process is really important because your friends and family, they're your cheerleaders.

Jenny Hazan: Exactly.

Iona Bain: They're always going to stick up for you, which is wonderful, but that might sometimes ever so slightly cloud their advice.

Jenny Hazan: Yes, maybe.

Iona Bain: So, let's talk about a few of the technical legal things that can happen when you get a divorce. What exactly are a financial consent order and clean break order? How are they different and why would you consider these things when you get divorced?

Jenny Hazan: They sound a little bit scary, those words, don't they?

Iona Bain: They really do. Yeah.

Jenny Hazan: Yeah. So, let's talk through them one by one. So, your financial consent order in reality is paperwork that just legally and finally confirms what you and your ex- partner have agreed about what you're doing with money. So, pensions, assets, any maintenance payments, anything along those lines. And that's a really important part to get clear on how you're going to divide assets. And that's about what you're doing right now. When we look at a clean break order, that almost takes it to the next step. It's like the advanced version and can be included as part of the submission that you make in your financial consent order.

But that is about saying from the point that you've settled your divorce, from that point onwards, we will have no claim on each other's income, future assets. If you were to get a great big inheritance further down the line, I won't get any looking on that. And then my favourite example, if one of us wins the lottery, we're not going to suddenly turn up and say, " Ooh, I would like a bit of that, please." And the way I can explain it that is hopefully simple is if you go to a restaurant, the first one, the financial consent order is really about agreeing between you, how you're going to settle the bill there and then current situation.

The clean break order is really about you agreeing that in five years’ time, you're not going to send each other an invoice trying to change the agreed amount that you had back then. So, one of them is current, one of them is future. Now, it's not right for everyone. So, for example, a clean break order might not be right if you've got ongoing maintenance payments, child payments, et cetera, but that's where good advice can help you understand.

Iona Bain: So, divorce, it's not just about separating finances though. It's about updating paperwork, not the most thrilling task in the world, but it is important. What are the key documents that people often forget to review during this time?

Jenny Hazan: They don't tell you about the admin, but actually there are a few key things that are really, really important. So, the first one is if you have any joint accounts, joint credit cards, joint loans, debt, you are both legally responsible for these. So, it's really important. Reach out to your lender early on. Some people are surprised about how helpful they are, but you have to imagine that lenders deal with this all the time and they can help you understand your options. The second thing, it's really checking the will, checking the pension, checking your insurances, and seeing if you've still got your ex listed as the person who will benefit from all of these things if you were to die.

 And it's a great opportunity to review what you did say, what you do want to happen if anything was to happen to you. And then the third space is really if you've got any joint life policies or health policies, you'll need to consider taking out a policy on your own. This is a great time for you to also think about if as your needs have changed, whether you have any additional needs. So, a good example is if you move out on your own and suddenly you are solely responsible for your rent or your mortgage, what would happen if you were unable to work for a long period of time due to sickness or ill health? So, there's income protection helps with that.

So, it's just important to check in on, is it a straight swap just to a policy on my own or is it me rethinking the needs that I've now got and what would be best suited?

Iona Bain: Mm- hmm. Quite a lot to think about there, but all those things are really important because actually in my line of work, you do see a lot of these things end up in court later on and it can get quite messy and you can definitely avoid that with just a bit of attention to the paperwork now. So, once a dust settles, what are some practical steps that people can take to then build up their savings and their pensions on their own? So, you take a breath.

Jenny Hazan: Finally reached a point where you feel more grounded in what you can do next and that's important. Again, you can start small. The first thing is really about building up that emergency savings buffer. So, we often say three to six months of your essential expenses is what you should put aside in cash somewhere accessible that gives you that safety net. So, that's really important. Once you've done that, you can then start to think about what some of those medium and long- term goals are that you've got for yourself and you can start saving. Just put a little bit away each month. If you're thinking about medium to long- term goals, so five years plus, you can also think about investing as well.

And the long- term bit is really about checking in with your pension. So, what happened during the time that you were going through the separation divorce? Did you reduce your contributions? Do you need to lift those back up? Are you on track for what you really want? And I think it's hard, isn't it? Because you sit there and think, " Oh God, in 30 years, I can put that off." But actually people don't realize how much of a bigger difference a small change today will make in those 20 to 30 years. And look, you can access lots of apps and tools. And we have launched a guided retirement planner that actually helps people to play around with those options.

So, what happens if I add a little bit in each month and it's quite amazing the sort of impact that you see that it can have and that can be really motivating. So, an opportunity for you to just reset.

Iona Bain: Yes. And get that inspiration where you can find it.

Jenny Hazan: Exactly.

Iona Bain: Well, this has been incredibly helpful, Jenny. I'm going to finish up with what is the one thing that you would like people to take away from this?

Jenny Hazan: Talk to your partner or ex- partner about money. It can be really awkward to have those conversations in the beginning, but I promise you it will be financially better to have the conversations than dealing with them later on. And if you are going through a divorce or a big breakup, then it's still really important that you get to know those numbers. So, start that conversation now.

Iona Bain: I couldn't agree more. Thank you so much.

Jenny Hazan: Thank you.

Iona Bain: And that brings us to the end of today's episode of A Little Bit Richer. A huge thank you to Jenny for sharing her expertise and her personal insights, which will hopefully make this whole area feel that little bit easier to navigate. If you found this episode helpful, I'd love it if you could share it with someone who might need it right now. Next time, friend of the show, Crystal McGilvrey is back to talk about how to handle the ups and downs of being self- employed. This podcast is brought to you by L&G. You can keep up with the show on YouTube, TikTok, and Instagram @legalandgeneral.

If you have a question or topic that you'd like answered on the show, then you can get in touch on our socials. Please do. Until next time, see you soon and thank you for listening.