The biggest divorce law overhaul in 50 years is set to herald a rush to separate, as so-called no-fault legislation comes into force today. But experts warn that the financial fate of divorced women remains perilous.
Designed to make the process simpler and less traumatic for separating couples, the new rules remove the need for either or both parties to have committed adultery, deserted, behaved unreasonably or having been separated for several years before a divorce was granted.
But the rules do nothing to address the continuing unfairness when financial assets are split, warns Emma Watkins, chief pension officer and long-timer at Scottish Widows.
“We know from historical evidence that women are likely to be often harmed,” she says. “Generally, women’s retirement prospects are already worse than men’s, but add a divorce and they deteriorate even further.”
Although retirement pots are usually a couple’s second, if not greatest, asset, they are often ignored during divorce, mistakenly viewed as personal rather than shared property. In fact, our analysis shows it costs women up to £5billion a year.
Analysis of the most recent Family Court statistics available from wealth management firm Quilter shows that 116,612 petitions were filed for marriage dissolution in 2019, but only 13% contained some sort of settlement order. pensions.
This is despite a recent trend among people divorcing later in life. According to the Office for National Statistics, over the past two decades the average age at which a person can divorce has increased by eight years for both men and women, to 46.4 years for men and 43.9 years. for women.
And while the new rules finally bring divorce laws into the 21st century, “it opens the door to more couples divorcing themselves, as lawyers become less of an integral part of the process,” says Jon Greer, manager. retirement policy at Quilter.
“This in turn could mean that couples, when considering splitting their money, forget to include their respective pensions.”
The low number of support settlements may be due to a lack of understanding or knowledge in this complex area by divorce practitioners and their clients. It could also be because more people are choosing to go the pension offset route. For example, a spouse may wish to remain in the marital home instead of receiving part of the pension rights of his ex-spouse.
In fact, the pension wealth of single mothers has almost halved in the past two years to just £11,000, 40% less than in 2020, research by pension provider NOW: Pensions has found. that more than half of single mothers currently do not qualify for an employer pension to help increase this amount.
The pensions trade association, the PLSA, suggests individuals need an income of £20,200 a year for a ‘moderate’ lifestyle in old age, meaning single mothers face the poor pensions.
Charlotte Carter, 31, independent single mum, says: “As a single mum it is difficult to plan for the future as planning for the month or year ahead can often be a challenge. With the current rising cost of living, these barriers will only get worse, but we are a resilient group and will continue to fight for equality in society.
“I never even thought about my long-term finances, as I always focused on what actions I could take to improve my immediate future. I am moving out of town to obtain rental accommodation due to the housing crisis single parent finances are under pressure, more needs to be done to help single parents save for their future and raising awareness of this problem and the solutions that could solve it is something that I believe can help to make this change.
“It is truly troubling that the majority of single mothers are excluded from working retirement savings, with single mothers reaching retirement age with the lowest pension wealth ever recorded,” adds Samantha Gould, Chief Financial Officer. campaigns at NOW: Pensions.
“Childcare costs are unsustainable and as a single mother myself there is already so much pressure as the sole breadwinner and carer in a household. Single mothers will feel the effects and many “These will be forced to stop working altogether to care for their children. This perpetuates the current savings gaps experienced by some groups in the UK that need to be addressed.”
“With the majority of single mothers now excluded from occupational pensions, we are calling on the government to make policy changes and remove the £10,000 automatic enrollment trigger and start contributions from the first £1 of income” , she adds.
“This would allow an additional 200,000 single mothers to benefit from a workplace pension plan and increase their financial security in retirement. We must ensure that everyone has an equal opportunity to save for their future and to build up an adequate reserve of savings for later in life.