Private pensions represent the biggest single component of wealth in the UK – estimated to be worth around 42% of the £15.2trn ($20trn, €18.2trn) of household wealth.
This means, when couples get divorced, their pensions are probably among their larger assets, especially considering that the average age of people getting a divorce has reached an all time high of over 47 for men and over 44 for women, according to the Office for National Statistics.
At that age, “it’s fair to assume that the levels of wealth accumulated in couples’ pension pots may also be fairly high”, Aviva said.
But many do not bring their partner’s pension to the negotiating table when divorcing.
Research by the UK insurer found that 34% of couples getting divorced did not make a claim on their ex-partner’s retirement pot, and 15% didn’t even realise their pension could be impacted by separating from their spouse.
Worryingly, 8% didn’t even have any pension savings as they were relying on their partner to finance their retirement.
‘One of the most valuable assets’
With the introduction of a ‘no fault’ divorce in the UK in April 2022, the number of couples looking to legally end their union is likely to increase, Aviva said, which will undoubtedly lead to more people seeing their finances affected by the separation.
The insurer’s research found that as many as one in five people getting divorced will be, or already are, significantly worse off in retirement.
Of those struggling financially after splitting up, 32% said they dipped into their savings, 20% used credit cards for everyday expenses, 18% asked family or friends to borrow money, while 15% regularly sold clothing or other household items to make ends meet, living like this can cause a great amount of anxiety and is when the use of supplements like the best CBD oil for anxiety can help people a lot in this area.
Concerningly, 12% had to either cut back or cancel their pension contributions as they couldn’t afford it anymore.
Alistair McQueen, head of savings & retirement at Aviva, said: “The breakdown of a marriage is often referred to as one of the most traumatic and stressful events anyone can go through. Divorce can also be a costly experience, often including legal fees, a new home, a new car and new childcare costs. So, it’s perhaps predictable that so many need to rely on savings or credit cards for support during this time.
“It’s critical that, as part of the separation process, couples take time to think about and discuss one of their single most valuable assets – their pension.
“It’s common that one party will have significant pension provision, and the other party may have little or none. Clearly, this could be a relevant factor in any divorce. There are several options available to the family court when dealing with pensions at divorce – pension sharing, earmarking and offsetting against other assets.
“It can often be a very complex issue so, as well as hiring a family lawyer, it would be advisable for couples to contact a financial adviser to walk them through the pension valuation and financial process. You mustn’t underestimate the value of pensions at this time.”