Divorced women risk serious financial hardship in later life, because when they're sorting out a financial settlement during the divorce process, they miss what is often the largest asset held within the relationship: their husband's pension. Some 84% of them fail to bring the pension into consideration when working out a fair settlement, which could cost them tens of thousands of pounds in retirement.
Research from Scottish Widows found that just half of women are saving enough for their pension in their own right. In many cases their research found that women were on lower salaries, and so couldn't afford to pay as much into a pension. However, even where they were on higher incomes, their money was far more likely to be diverted into everyday expenses for the family instead of into a pension of their own. These factors contributed to the fact that women save an average of £206 a month into their pension, while men save an average of £298.
In the long-term, couples work out this imbalance, because women are more likely to rely on their partner's pension for a large portion of their income in retirement. In fact, the research showed that a fifth of all women in their 50s and 60s said they would need to rely on their spouse's pension. This fell to 18% of those in their 40s and 12% of those in their 30s, but still represents a significant proportion of women who would struggle to manage financially in retirement if they were on their own.
The problem is that around 42% of all marriages end in divorce, so women no longer have any access to their partner's pension.
Article continues below
Sharing the pension
The legislation takes this into account, and is designed so that actuaries can calculate how much a pension is worth and lawyers can bring it into discussions over how assets are divided during a divorce.
However, the results clearly show that women vastly underestimate the value of their partner's pension, so 84% don't consider it at all during divorce. In fact, if your partner has been working and saving into a pension for a considerable time, the value of that pension is likely to rival the value of the family home.
If you are going through a divorce, therefore it's vital to get a pension valuation from the provider, to understand whether pension savings are significant enough to merit more discussion when you are splitting the finances.
In instances where the pension is worth as much as the family home, it's worth getting an independent valuation from an actuary, and then advice from a pensions lawyer on whether to offset the cost against the value of the property, or split both between you fairly.
It's not a simple or cheap process, but then again no part of getting divorced is either simple or cheap. And while you're spending serious sums of cash arguing over sentimental belongings, it makes sense to spend a bit of time and money in splitting what might be your most valuable asset too.
Pensions on AOL Money
Pension changes 2015: could you face a tax shock?
Flat-rate state pension: who will miss out?
Over-50s regret not saving enough