Retirement tips for divorcing couples as many unaware split can affect pension


New research conducted on behalf of Aviva has discovered that one in six (15%) divorced people did not realize their pension could be affected by splitting up.

The survey of more than 1,000 people across the UK who have gone through a divorce found that more than a third (34%) had made no claim on their former partner’s pension.

It also found that some eight per cent of divorcees do not have their own pension savings – and had been relying on their partner to finance their retirement. As a result of divorce, nearly one in five said they will be, or are, significantly worse off in retirement.

Aviva said it is important for couples who are splitting up to understand the impact that it will have on the family finances, including pensions and later-life income needs.

Figures from the Office for National Statistics (ONS) show that the UK currently holds £15.2 trillion in household wealth, with private pensions making up around £6.4 trillion (42%) of that total.

Men are aged 47 on average when they divorce and women are typically aged 44 – ages at which the amount of pension wealth built up may be significant.

To supplement their income following a divorce, a third of divorcees (32%) said they dipped into their savings, one in five (20%) used credit cards for everyday living expenses and a similar number (18%) borrowed from friends or family .

Alistair McQueen, head of savings and retirement at Aviva said: “The breakdown of a marriage is often referred to as one of the most traumatic and stressful events anyone can go through.

“Divorce can also be a costly experience, often including legal fees, a new home, a new car and new childcare costs. So, it’s perhaps predictable that so many need to rely on savings or credit cards for support during this time.

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“It’s critical that, as part of the separation process, couples take time to think about and discuss one of their single most valuable assets, their pension.

“It’s common that one party will have significant pension provision, and the other party may have little or none. Clearly, this could be a relevant factor in any divorce.”

He said there are several options when dealing with pensions at divorce and it can often be a very complex issue, adding: “As well as hiring a family lawyer, it would be advisable for couples to contact a financial adviser to walk them through the pension valuation and financial process.

“You mustn’t underestimate the value of pensions at this time.”

Recent research by Hargreaves Lansdown found that one in seven people start planning for their retirement between the ages of 18 and 24, which means that by the time someone starts divorce proceedings they have already accumulated 20 years worth of savings.

And it’s not just a domestic split that can have an impact on later-life finances.

Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, explains: “Pensions are a long-term game and it’s worth taking the time earlier in your career to think about what kind of retirement you would like and put a plan in place to help you achieve it.

“Circumstances can change quickly – we’ve seen many older workers leave the workplace early because of the pandemic and many have not returned. Having a retirement plan already in place can take the fear factor out of the future and mean you have the choice to take on part-time work for instance, rather than relying on a full-time job.”

Five ways to take control of your retirement planning

Check your State Pension

The State Pension forms the backbone of many people’s retirement income with a full new State Pension currently worth £185.15 per week.

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You need 10 years’ worth of National Insurance (NI) credits to qualify for a State Pension and 35 years’ worth to get the full amount.

If you don’t work, then claiming various benefits such as Universal Credit or Child Benefit will also give you an NI credit.

You can check how much state pension you are on track to get on the GOV.UK website here.

If there are any gaps in your NI record then you can potentially buy voluntary NI credits to increase your entitlement.

Start a pension and keep contributing

Under auto-enrolment anyone over the age of 22 and earning more than £10,000 will be enrolled into a workplace pension.

In addition to your own contributions, you will also get contributions from your employer and the government in the form of tax relief and over time this can help you build up a decent pension. It is important to keep up contributions as much as possible, if you decide to cut back or stop contributions at any point then you may forget to start them again when things get easier.

While you will be re-enrolled every three years, time out of your pension will affect how much you end up with.

Boost contributions whenever you can

Current auto-enrollment minimum contributions are currently 8%.

This is a good start, but the reality is you will need to save more than this to get a good pension. Increasing your contribution every time you get a pay-rise or a new job for instance can really make a difference.

It’s also worth checking to see if your employer will pay in more if you increase your contribution. While many employers stick to the auto-enrolment minimums there are others who will match your contribution up to a certain level and this can make a significant difference.

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Think about what kind of retirement you want and check you are on track

Everyone has a different idea of ​​what they want their retirement to look like, but it is worth taking the time to plan out in advance what kind of lifestyle you want and how much it is likely to cost you.

You can use this as a basis for how much you need to have in your pension. Check your progress regularly to make sure you remain on track.

Join the conversation on our Money Saving Scotland Facebook group for energy and money-saving tips, the latest benefits news, consumer help and advice on coping with the cost of living crisis.

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You can also follow us on Twitter @Recordmoney_ for regular updates throughout the day.

Use pension calculators

Using a pension calculator is a good way to model how an increase in your contributions can affect how much you end up with in retirement.

Most pension providers will have them along with other free tools and they can be useful in helping you make sure your planning stays on track.

To keep up to date with the latest pensions news, join our Money Saving Scotland Facebook group here, follow Record Money on Twitter hereor subscribe to our twice weekly newsletter here.


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George Holan

George Holan is chief editor at Plainsmen Post and has articles published in many notable publications in the last decade.

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