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Divorcees need better understanding of pension issues, experts warn

66 per cent of divorced women rely on State Pension

A study commissioned by Phoenix Group has found that after getting divorced one in five (19%) women stopped paying into a pension altogether and a quarter (25%) reduced their savings. The research also reveals that two in five divorced women (42%) say they are worse off financially after divorce. Additionally, half of divorced women made no contributions at all to a pension scheme whilst married, but only one in six had rights to a pension through their ex-husband.

Further findings were that whist 66% of female divorcees over 40 rely on the State pension in retirement, only 29% rely on their savings and 12% on their investments. One in five (20%) have no idea at all about their pension provision since their divorce. A 'staggering' two in five (38%) have no idea what settlement they received following their divorce and only 6% received pensions sharing order or a pension earmarking order. 

The research can be read here.  

Maggie Rae, consultant with Clintons Solicitors and co-author of Pensions on Divorce: Law, Practice and Precedents (Lime Legal), comments:

"The relative poverty of women in retirement as compared to men has been a problem for a long time and one which successive governments have tried to address, through changes to the State Pension scheme and the introduction in 2000 of legislation enabling pensions to be split on divorce.

"At the time the settlement is being negotiated it is important that solicitors obtain details of what it will provide by way of income going forward. Where a pension sharing order is being sought an actuary can give details of what income any particular pension sharing order will produce and what percentage is needed to say achieve equality of income at retirement age. However it is important to remember that if a client receives a pension sharing order on divorce which is calculated so as to provide equality of income at retirement age, that may not end up being the result since many divorced men will work after the divorce and continue to pay into their pensions whilst, as this study shows, many divorced women will not, and so the gap between their retirement incomes will grow.

"Additionally many women believe that if they get a pension sharing order their retirement income is taken care of. This is rarely the case since the size of most pension sharing orders means that they will not of themselves produce adequate income in retirement.

"What this study demonstrates is that solicitors need to give their clients clear information about what their divorce settlement means and in many cases it will be sensible to direct them to a financial advisor who can explain the consequences of their settlement in financial terms and explain the steps they should take to secure their future income. It is important to remember that we are not financial advisors and should not give financial advice. This though does not stop us from directing our clients to those who can give such advice.

"I think many divorced women don't address these issues and it is our responsibility to ensure they do. The study shows that we are failing in this important task."