6th February 2014
With the divorce rate rising, pension providers have warned people of the financial implications of divorce as the figures have risen in the past year. The number of divorces in England and Wales in 2012 was 118,140, an increase of 0.5% since 2011, when there were 117,558 divorces according to the Office for National Statistics.
In 2012, 10.8 people divorced per thousand married population, a decrease of 19% compared with 13.3 in 2002. The number of divorces in 2012 was highest among men and women aged 40 to 44.
For those married in 1972, 22% of marriages had ended in divorce by their 15th wedding anniversary whereas for those married in 1997, almost a third of marriages had ended by this time.
David Macmillan, managing director, Aegon UK said: “Ending a marriage is an extremely stressful decision, compounded by the fact that divorce can have a life-changing impact on the finances of both parties. While retirement pots may not top the list of immediate concerns, especially if there are children involved, it does need to be addressed, particularly where the couple has been heavily reliant on one pension pot. The timing of the divorce is also extremely important, with the potential financial impact increasing the closer the couple are to retirement.
“A pension forms part of your marital assets and the Court has to take them into account when it comes to divorce settlements. The first step is to get all your pensions valued, note that this is done differently dependent on where you live in the UK. The judge will then assess the options. The pension pot could be shared by both parties or an agreed amount of net pension income or lump sum paid at point of retirement to the other party.
“Or in the case where one person has a greater share of key assets, you, or the Court, might decide to let the other party keep their pension income. If you live in Scotland a Pensions Sharing Agreement can be set up without going to court.”
Julie Hutchison Family Finance expert at Standard Life comments on the financial impact of divorce: “No-one wants to enter a marriage planning for divorce, but it may be worth considering a pre-nuptial agreement – it can help people feel they are going to be treated fairly if things sadly don’t work out. While some couples might feel uncomfortable talking about money, others will see it as a chance to be clear in financial terms about who brings what to a relationship, and who walks away with what if it goes wrong. In the Family Financial Tree, a recent report from Standard Life, we found that 42% of people turn to their partners when deciding their future financial plans and 36% involve their spouse in day-to-day financial management – so it clearly makes sense for couples to start conversations about finances before their marriage even begins and it could help them avoid problems further down the line.”
The ONS found that almost half (48%) of couples divorcing in 2012 had at least one child under 16. The reality is, many couples now include someone who has children from a previous marriage. With regards to the financial responsibilities associated with these new families, The Family Financial Tree research from standard Life found the following: “The family unit is often influenced by divorce and subsequent marriages and many parents and grandparents find themselves with step-children and step-grandchildren. Looking at them specifically, however, is it clear that they are not treated any differently when it comes to helping out financially. Only 1% of parents say that they don’t feel they need to give the same amount of money to their step-children as their children and the story is similar for grandparents.”