Divorce costs women when they retire

More than seven in 10 (71%) couples don't consider pensions during divorce proceeding, leaving women £5bn out of pocket every year, a report by Scottish Widows has found.

The 13^th edition of the annual report Women and Retirement (pdf file) found two-fifths (40%) of women said their retirement prospects worsened because of divorce, compared to less than a fifth (19%) of men.

It found just 9% of women claimed they want a fair share of pensions, despite the average married couple's retirement pot totalling £132,000 - more than five times the average UK salary of £26,000 or just over the average price of a house in Bradford.

The report found married people would be more concerned about their fair share of any jointly owned property (56%) and more than a third (36%) would want to split their combined savings.

Some 13% of married people said they would be more worried about losing a pet during a settlement than sharing a pension.

The report pointed to a general lack of knowledge about pension-related legalities that could be contributing to women's retirement saving woes post-divorce.

Nearly half (48%) of women have no idea what happens to pensions when couples get divorced, which would explain why so few couples consider them as part of a settlement.

Furthermore, a fifth (22%) presume each partner keeps their own pension and 15% believe they are split 50-50, no matter what the circumstances.

The report suggested to even out the inequality between men and women in retirement, the automatic enrolment minimum earnings threshold should be scrapped and the minimum age to qualify for automatic enrolment should come down from 22 to 18.

It also suggested the inclusion of pensions in divorce proceedings should be made compulsory and the workplace should be used better as a key channel for addressing the retirement savings gap.

The report also recommends that the inclusion of pensions in divorce proceedings be compulsory. ONS data shows that 42% of marriages end in divorce, but their research reveals that seven in 10 (71%) couples don’t consider pensions during divorce proceedings. They would like to see a Government-led education campaign to address this issue and help men and women better understand the legalities. As the Department for Work and Pensions scopes out the remit of the new Financial Advice and Guidance Body, there’s an opportunity to encourage the inclusion of a module focusing on discussing pensions as part of divorce negotiations.