Ladies - how can you avoid the divorced pensions trap?

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4 August 2020

Ladies - how can you avoid the divorced pensions trap?

The coronavirus pandemic is compounding already challenging gender issues on both a personal and professional level.

The gender pay gap and gender pension gap present significant hurdles for women trying to save for their futures.

With the pressures of daily life catalysed by lockdown, divorce rates are up compared to this time last year, meaning that these gaps are in danger of widening.

New research commissioned by our team at NOW: Pensions has uncovered the challenges faced by divorced women when they retire.

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When a divorced man retires, his median pension wealth is £103,500. When a divorced woman retires, she’s left with £26,100. That’s a gap of almost £80,000.

Divorced women are twice as likely to save nothing for retirement compared to divorced men.

What’s driving this gap?

First of all, divorced women suffer from low levels of homeownership – 49% own homes compared to the UK average of 65%. We know that people who rent face higher housing costs and more financial instability compared to homeowners.

Then we’ve got income challenges: 34% of divorced women work part-time, and many of those jobs are in low-paying occupations.

Combine this with the cost of childcare and we begin to get better understanding of the reasons behind gendered divorcee pension inequality. But what’s the reality of living with this disparity?

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Remember that pensions are an asset

Pension pots are often people’s second most-valuable asset after property, yet seven out of ten divorce settlements (71%) fail to take pensions into consideration, which puts some women at a disadvantage.

Add that to the job losses caused by coronavirus - 31 million of which will be lost by women[1] - along with the closure of schools and the spike in demand for childcare and we find that women are earning less and spending more.

This all impacts how much you can earn, save and pay into a pension.

So, how can you avoid falling into this gap when getting divorced?

As someone who’s been through the divorce process, I know all too-well that there are rarely any winners on either side. It’s so important to consider your long-term financial needs and how you can best achieve a fair outcome.

1. Ensure that you include all assets in your divorce documentation

Pensions are often the second largest asset, after property, so it’s important to consider all pensions as assets. When court proceedings are issued, both parties are required to complete Form E. Note that you must provide a full, frank and clear disclosure of all your financial and other relevant circumstances – failure to give full and accurate disclosure may result in any order the court makes being set aside.

2. Seek independent legal advice

‘Quickie divorces’ are on the rise but swift online (DIY) divorces may not give you full sight of both parties’ assets and liabilities. While you might save yourself time and money in the short-term it’s important to think about your future financial stability.

3. Try mediation to avoid expensive court fees

The courts now insist that parties should try mediation before any court proceedings are issued. If you’re able to attend mediation, you’ll save a significant amount of money – and stress. Both parties are still legally obliged to complete their Form E’s so you’ll still get a full picture of all assets on both sides.

4. Consider your long-term financial security

Women often take property over pensions to provide a safety net to care for their children. However, if you do sacrifice any pension sharing (which you’re entitled to), you might lose out on long-term financial security.

It’s time that we demand an equal playing field and push for some serious policy changes to address the inequalities in both pay and pensions.

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Read our press coverage from our latest research

The Times

The Daily Express

Pensions Age

The Telegraph

This is Money (Daily Mail)

The Daily Express

Samantha Gould, NOW:Pensions