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Female Divorcees May Be Disadvantaged At Retirement, Warns Wealth Manager WHI
• Increase in couples over 60 getting divorced • Pension provision more frequently left to men in divorce settlements
Figures show a 50 per cent* rise in people over 60 filing for divorce. At the same time, one in five women say they do not pay into a pension, because they expect their spouse to ‘take care of it’.** But as retirement lifestyle expectations increase and state support for pensioners comes under increasing pressure, it is important to seek the appropriate financial advice and consider long term financial planning when agreeing settlements.
From 1999, the Welfare Reform and Pensions Act gave divorcing couples three options in dividing their retirement assets. These are:
• Pension Attachment Orders (Earmarking):
• Pension Sharing Orders (Splitting): the pension value is split there and then, so the other partner can lay immediate claim to their portion.
Each of these methods has its own merits and drawbacks that impact on the simplicity of agreeing pension arrangements. An offsetting arrangement is the most common for couples who want a clean break and have enough assets to divide in this way, yet dividing these assets can have implications for the long term. For example, the main pension holder and breadwinner is often the husband, leaving the ex-wife awarded with a one off lump sum or matrimonial home to manage, rather than a regular income in retirement.
In the current housing market and economic climate, where property prices and the value of other assets tend to fluctuate more frequently, it’s important that both parties appreciate that asset settlements cannot normally be renegotiated after a divorce is finalised. Therefore both parties would benefit from seeking impartial expert advice on future risks to asset values in advance of a decree absolute.
Lindsey Hamilton, Head of Wealth Management at WHI, commented: “The UK now leads Europe’s divorce charts, with four in ten marriages currently ending in divorce. The fact that there has been a significant rise in divorces in the over 60s age bracket has some serious implications on financial planning and wealth management. While offsetting assets can provide women with a one off lump sum - possibly including property - when the divorce is settled, these women must remember that the safety net of a pension in their husband’s name will not be there any more.”
She continued: “Divorce is a stressful and traumatic process at any age, but made all the more complicated when retirement income is under scrutiny. It is really important that people going through divorce not only seek the right legal advice, but also pay attention to planning both their short and long term finances.”
WHI is a wealth management firm with a national presence, but also with the local capabilities to provide a bespoke and personal service that is so important with complicated matters such as financial planning associated with divorce. WHI also partners with legal firms who can advise on wider aspects of divorce settlements.
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