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Wives don’t have to lose out on pensions when they divorce

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James Harbottle
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Wives don’t have to lose out on pensions when they divorce

Lauren Preedy - Senior Associate Solicitor - Head of Divorce and Relationships Team
Lauren Preedy – Senior Associate Solicitor – Head of Divorce and Relationships Team

Last week the University of Manchester published a report analysing data on pensions and divorce. The headline finding of the report was that husbands have substantially more private pension wealth than wives. This, says the report’s authors, “poses particular challenges when they divorce.”

That husbands should, on average, have substantially greater pension provision than wives should, of course, come as no surprise. This is not a family law issue, but rather a factor of the society in which we live. Like it or not, husbands are still the predominant breadwinners in the majority of marriages, and it follows from that that they are likely to have more in their pension pots than wives.

But what is a family law issue is that such inequalities are addressed by the court on divorce.

The problem

The researchers analysed the pension wealth of almost 30,000 people over the age of 30.

They found that married men have the most pension wealth, with those aged 45-54 having a median of about £86,000, compared with £40,000 for women. Those men aged 55-64 have £185,000, compared with £55,800 for women, and those men aged 65-69 have just over £260,000, compared to just £28,000 for married women.

The researchers also found that while around 90% of couples have some pension wealth between them, in about half of couples with pensions, one partner has more than 90% of the pension wealth. Fewer than 15% of couples have pensions that are approximately equal.

Family Law Office shotThe researchers were naturally concerned that these inequalities are not being properly addressed when the parties divorce, pointing out that there is a lack of data about pension outcomes after divorce. Dr Jennifer Buckley of the University of Manchester commented:

“It is clear that considering pensions on divorce could have considerable impact on people’s finances in later life – especially women. Information for divorcing couples is vital. We also need to address important questions about the long-term financial implications of divorce on pensions, and why we see such an imbalance of pension wealth within couples.”

The report has led to calls for the law to be reformed to make pension division on divorce fairer.

The solutionpensions when they divorce Divorce highlighted

It may be the case that many wives do not receive their full pension entitlement on divorce, but this does not need to be so. It is perfectly possible to achieve a fair result under the law as it stands now.

The law makes it clear that significant pension assets should always be taken into account in a divorce settlement – the spouse with the smaller pension pot should never lose out by ending up with less than their entitlement.

Exactly what their entitlement is and how they are to receive it will depend upon the facts of the case.

Pension entitlement will depend upon such factors as the ages of the parties, the length of the marriage and the needs of the parties. In most cases, however, the starting-point is equal division.

There are three ways that a party’s pension entitlement can be satisfied: by an ‘offsetting’ arrangement, whereby the party with the pension keeps it, but the other party receives a greater share of other assets in compensation; by a pension sharing order, whereby all or part of one party’s pension is transferred into a pension belonging to the other party; or by a pension attachment order, whereby one party receives part of the other party’s pension, when the other party receives it.

Of the three, pension sharing orders are the most common, and are often used to ‘equalise’ pension entitlement between couples.

The secret to receiving your pension entitlement, in the best way possible for you, lies not in changing the law, but in obtaining expert advice, not just from a family lawyer, but also from a financial advisor.
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