Almost a fifth of people who divorce are, or will be, financially worse off as a result1.
With the same research highlighting a third of divorcees are being forced to take money from their savings to supplement their finances, while 18% are borrowing from family and friends, and 15% resort to selling their possessions to make ends meet – many divorcees are clearly struggling financially.
With 42% (or £6.4tn) of UK wealth currently held in private pensions, they are highly valuable assets which can feature as hugely important elements of a divorce settlement. Following this, what’s really interesting is that 15% of divorced people had no idea that their pension could be impacted by getting divorced and 35% did not make any claim on their former spouse’s pension.
Don’t underestimate your pension So, we’ve determined that pensions are an important asset and are likely, depending on each divorcing couple’s circumstances, to be considered as part of an overall financial settlement.
As each divorce settlement is different, the treatment of any pensions involved will also be very different; it’s certainly no rule for all. In some cases, for example, if both parties have a pension, they could be entirely omitted from the settlement. For divorces after December 2000, pensions can be taken into account in three ways, offsetting, earmarking and pension sharing.
It’s actually a very complex area; in addition, rules vary regarding what exactly can be divided, depending on where in the UK you are divorcing.
Dividing up any pensions may be one of the largest financial decisions you need to make. We are here to help you make those important decisions with your finances as you navigate the complexities (emotional and financial) of divorce.
1) Aviva, 2022