Mar 24
Pension assets will often be one of the most substantial assets on divorce or partnership breakdown and can often be as valuable as the equity in the family home (and on occasions sometimes more).
It is now 24 years ago that an amendment was introduced to matrimonial legislation that allowed family lawyers to share pensions on divorce rather than trading one asset against the other. It is therefore somewhat disheartening to read recent studies carried out by the Nuffield Foundation and Scottish Widows that 60% of divorced women are entering into retirement without sufficient pension income to meet their most basic needs and losing out on valuable pension benefits that were created during the marriage.
In my experience women often have limited pension provision and sometimes no provision at all. There are a number of reasons for this, for example maternity leave and part-time working due to childcare, and as a consequence had promotion prospects detrimentally impacted. They may return to work later, but later contributions may well be based on part-time or reduced salaries and do not benefit from lengthy investment periods. Most part time low paid jobs are predominantly occupied by women earning less than £10,000 per annum and those workers are not auto-enrolled onto occupational pension schemes. Conversely, the other party who has continued working has benefited from the support provided by the other who has been caring for the children and the home generally.
Contributions of all shapes and sizes including those which are “non-monetary” are recognised in law as being equally valuable. The spouse who works has benefited in experience, promotions and salary increases and has been able to continue to build a pension pot for the future. It is no surprise that women continue to suffer from the gender pay gap well into retirement, missing out on pension provision that they have helped to build.
General lack of interest in pensions and a strong (but misplaced) sense that they should remain with the spouse who paid into it were reported to be the reasons in the Nuffield Foundation Report for the failure to see pensions as a valuable resource. In some cases women who have not worked may not even have sufficient National Insurance contributions to their State Pension Scheme to get the full basic State Pension in retirement.
Why is the uptake in sharing pensions so low in recent years? I think this has, in part, been as an unintended consequence following the introduction of the “no fault divorce” in 2022. No longer do you have to allege extra marital affairs or terrible behaviour to convince a District Judge that your marriage has broken down. Whilst this was a huge step forward in reducing acrimony in divorces it did mean, however, that those couples who might have spoken to a solicitor about a fault-based divorce were much more likely to talk to a lawyer about finances too. Those couples are now going online, believing that the Final Divorce Order is the end of the matter. Pensions are one of those assets that seem to be overlooked or shared inequitably most commonly in DIY divorces.
There is likely to be a cliff edge at some point in the future as the parties move towards planning for retirement, pensions start to be drawn and women in particular are wondering why they never received a share and looking towards either revisiting matrimonial finances or facing poverty in retirement. Properly prepared professional Pension Reports is an essential part of planning for a life after divorce. Pension reports can be complicated and they do take time to prepare but these assets require full and proper attention and they are worth every single penny to get it right.
How we can help
We can help you to navigate a divorce or separation and consider all aspects including pension, to help you to move forward. Raworths’ family team is recognised as divorce and family law specialists, ranked highly by leading independent guides Legal 500 and Chambers UK.
Carmelita Ardren can be contacted on 01423 566 666 or email carmelita.ardren@raworths.co.uk
Published 5 March 2024
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