Dealing with Pension Inequality on Divorce
Manchester University's Institute for Collaborative Research on Ageing (MICRA) has identified that in half of couples with pensions, one partner will individually hold more than 90% of the total pension wealth.
In a number of cases, the value of one partners pension may far outweigh the value of properties, land and other assets. It is quite concerning that often couples will overlook their pensions when distributing marital assets on divorce.
Why Do Pensions Get Overlooked?
There are a number of reasons why couples may overlook pensions on divorce. These include:
- Pensions are held in individual names. Unless appropriately educated or advised, some may believe that they do not form part of the matrimonial pot
- Understanding pensions can be complicated. Alongside dealing with the emotional trauma that comes with divorce, this may be too much for people to deal with
- Pension wealth is not immediately accessible. Particularly for young couples, they will not be drawing on their pension for many years so may not consider the potential value as important
- There may be a feeling that because one party has not directly paid into their partners pension pot, they feel guilty about claiming a proportion of it
- Instructing an expert to advise on the division of a pension can be expensive. On top of already expensive legal fees, the additional cost of a pension actuary can feel like an unnecessary expense
Why Is Important to Consider Pensions on Divorce?
The value of some pensions, particularly for people working in the public sector, can be staggering. A good, sizable pension pot allows people the freedom to retire when they want to and enjoy the latter stages of life.
The research from MICRA identifies stark differences between the value of pension wealth between men and women. Many women, as identified in the research, have significantly smaller pension pots than men. The research calculated the following:
''Married men aged 45-54 have a median pension wealth of about £86,000 compared with £40,000 for women; those aged 55-64 have a median £185,000 compared with £55,800 for women; and those in the 65-69 age range have median pension wealth just over £260,000, compared to £28,000 for married women.''
If pensions are ignored, this could significantly prejudice women in reaching a fair and equitable financial settlement. In turn, this could impact their financial security both now and later in life.
What Should I Do Next?
Before taking any steps to divide your matrimonial assets, it is important to speak to a specialist about the process. To assist these discussions, you should obtain a recent valuation of your pension. As family lawyers, we can advise you on the divorce and financial remedy process including the court's approach to pensions.
In many cases, we will advise that additional advice be sought from a pension actuary. They will be able to calculate how yours and your partners pensions can be divided to achieve equality of income or capital (where appropriate). We can identify an appropriate pension actuary, prepare their instructions and support you with understanding the implications of their calculations.