Thousands of divorced women could be missing out on pension savings worth £4billion
Divorced women could be missing out on thousands of pounds
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Divorced women could be missing out on thousands of pounds worth of pension savings because they aren’t included in settlements.
There is between £2billion and £4billion a year in pension savings going unclaimed, which could have been included in divorce settlements, according to estimates by the Institute and Faculty of Actuaries (IFoA) and Scottish Widows.
A change to the law in 2000 meant pensions would start being included as part of a divorce settlement, however last year only around 30 per cent of splitting couples opted to do so.
Experts have suggested that pensions were seen as too complicated, and women often preferred to settle in favour of more exoteric assets such as the family home.
However, by focusing on the home alone, women are warned they could become asset-rich but cash-poor.
A spokesperson for The Law Society said: “I have sat down with clients and pleaded with them to consider looking at their spouse's pension.
Women are warned they could become asset-rich but cash-poor by only focusing on the home
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“In one case I managed to persuade a woman who was going to settle for the family home - which was worth around £200,000, to consider a pensions splitting order.
“So, we managed to go for a pension splitting order with her husband, a mid level civil servant, who had saved over £1million in his pension during their 20 year plus marriage.”
The IFoA Gender Pensions Gap Working Party estimated that each pensions splitting order would be worth around £30,000, after factoring in the gender pension gap, as well as things being equally split.
A spokesperson for the IFoA Gender Gap Pensions Gap Working Party said: “Our estimated figure could be very different in practice as pension pots may not be split 50/50, for example due to approximate allowance when dividing other assets.”
Samantha Gould, head of campaigns, NOW: Pensions which also worked alongside the IFoA, said: “Pensions are often the second most valuable asset after a home, but we see that property is often the greater focus during the divorce process which leaves divorcee’s asset-rich but cash-poor.
“Making sure that pension funds are considered by default in divorce settlements is a vital step to addressing pension inequality.
“Women are particularly disadvantaged when going through a divorce if pensions are forgotten, because their average savings are generally much smaller than men’s.”
There were around 120,000 divorces in the UK in 2022 - including England, Wales, Northern Ireland and Scotland - a figure the IFoA said was increasing among those aged 65 and above.
The IFoA estimated 60 per cent of divorces did not include the pension, meaning around £1.8billion a year was not being split.
A study by the University of Bristol and the Nuffield Foundation also found more than a third of divorcees did not know how much their pension savings, or their partner’s pension savings were worth.
Karen Doveston, a solicitor and chair of the Law Society’s family law committee explained that woman need to know what type of job their ex had as well as where they lived.
Doveston said: “If your ex has been employed in a civil service type job then they may have a government backed or minimum guaranteed pension plan, such as a final salary scheme.
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“These are worth a lot more.
“Also consider where you live or lived, for example Southend in the 1970s and 1980s was a big banking town so their ex may have amassed a large pension during those years."
“It’s regional too, if you work near Salisbury, then it may be military pensions or in Dagenham the old Ford pensions scheme, and so on.”