Pensions And Divorce – What Is Really Fair?
‘I don’t want to claim against their pension’ – One of the most repeated comments we hear from clients when we first meet them and one that is so important to consider further with a client before they finalise that decision.
When they make this statement, many people don’t even know the value of their spouse’s pension and what they are actually giving up if they decide to exclude it from any settlement. Pensions are often the biggest single asset (often more valuable that the matrimonial home) and it is extremely rare that it should be excluded from consideration in how matrimonial assets should be shared on divorce.
According to the National Office of Statistics, pensions make up 42% of total household wealth whilst wealth held in property equates to 36%, making it all the more concerning that a recent Which? survey (carried out in November 2021) found that only 15% of divorcing couples include pensions in their financial settlements.
It’s all too common that the party with the smaller pension (or even no pension at all) feels that their spouse has accrued their pension alone, often through employment, and therefore they feel that the pension belongs to their spouse alone. Spouses somehow feel that it’s wrong to treat the pension as a matrimonial asset when, in fact, that is exactly what it is. On many occasions, a spouse with a substantial pension has been able to accrue that pension because of the support of the other spouse, perhaps with latter taking on the majority of the household or childcare responsibilities. When considered in this way, it’s far easier to see why pensions are rightly considered matrimonial assets and to simply ignore them in financial settlements would usually lead to an unfair distribution of the assets.
The law does allow for pensions to be shared on divorce and it is an option that should always be considered. Many people prioritise staying in the family home over sharing the pension, without considering how they will generate an income in retirement, and it may be for that reason that the use of pension sharing provisions are alarmingly low. However, a recent study by the University of Manchester found that between the ages of 65 and 69 women, on average, have pension wealth of £28,000 whilst the average pension of a man is almost ten times that. This obviously results in a significant imbalance in income in retirement that must, at the very least, be given consideration on divorce.
Dividing pensions on divorce can be a complex task and it shouldn’t simply be a case of offsetting the value of the pension against other assets. There are many aspects that will need to be considered with each client in order to ensure that any financial settlement is fair and suits their needs. If you would like any further advice regarding pensions or any other financial issues on divorce, please contact our family team on 01903 229999 or info@bennett-griffin.co.uk.