Pensions: how to divide the spoils when getting a divorce

With just 36% of divorce settlements including provisions for sharing pension asset, women getting divorced need much better advice about their pension options.

Couple facing each other over a negotiating table© Getty

Will she get her fair share?

Couple facing each other over a negotiating table© Getty

Women may be missing out on pension assets after a divorce

The government plans to ensure that women involved in divorce negotiations will be given much better advice about their pension options. Penny Mordaunt, the minister for women and equalities, said she had grown increasingly worried about the failure of the divorce courts to ensure women are getting a fair share of couples' retirement savings; just 36% of divorce settlements include provisions for sharing pension assets.

The minister promised a new campaign to raise awareness of the benefits of pension sharing as well as more effort to ensure couples understand how the process works. The proposals are especially important given the well documented "savings gap". Women routinely save less than men for retirement, often because they have taken time out of work to take on caring duties, and may be financially dependent on their partners in old age.

The main options

However, while couples have several options, pension experts say divorce lawyers often lack the knowledge to help their clients reach a fair outcome. A group of specialist legal experts, known as the Pension Advisory Group, has just published a new best-practice guide for the profession following research showing many divorce lawyers aren't confident about how to split pensions. There have also been a number of negligence claims against family lawyers accused of failing to consider pensions properly during a divorce.

The issue may have been exacerbated by the pension freedom reforms introduced in 2015. These changed the rules about how and when people may access pension savings. One effect has been to undermine pension earmarking in a divorce settlement.

The Pension Advisory Group warns, for instance, that the terms of some earmarking orders made before the reforms contradict the rules as they now stand. It is possible, for example, that one partner might be able to withdraw their entire pension fund as a cash lump sum, circumventing an order that income generated from the fund should be shared with their former spouse.

Recommended

Make sure your pension savings don't breach the lifetime allowance
Pensions

Make sure your pension savings don't breach the lifetime allowance

Don’t forget the lifetime allowance when reviewing your pension planning – breaching it could prove very costly, says David Prosser.
7 Jan 2022
How to track down your lost pension savings
Pensions

How to track down your lost pension savings

Some straightforward detective work could reunite you with pension savings from previous jobs that you may have mislaid.
20 Dec 2021
What to do if you still have a mortgage when you retire
Mortgages

What to do if you still have a mortgage when you retire

In the next few decades, many people will be paying back their home loans well into retirement. David Prosser explains their options.
7 Dec 2021
Making sense of the new minimum pension age rules
Pensions

Making sense of the new minimum pension age rules

The rules surrounding the minimum age at which you can start tapping into your retirement savings have been tweaked, but are still confusing. David Pr…
23 Nov 2021

Most Popular

Shareholder capitalism: why we must return power to listed companies’ ultimate owners
Investment strategy

Shareholder capitalism: why we must return power to listed companies’ ultimate owners

Under our system of shareholder capitalism it's not fund managers, it‘s the individual investors – the company's ultimate owners – who should be telli…
24 Jan 2022
Three innovative Asian stocks to buy now
Share tips

Three innovative Asian stocks to buy now

Professional investor Fay Ren of the Cerno Pacific Fund highlights three of her favourite Asian stocks to buy now
24 Jan 2022
Temple Bar’s Ian Lance and Nick Purves: the essence of value investing
Investment strategy

Temple Bar’s Ian Lance and Nick Purves: the essence of value investing

Ian Lance and Nick Purves of the Temple Bar investment trust explain the essence of “value investing” – buying something for less than its intrinsic v…
14 Jan 2022