Grey Divorce: Financial Planning for Divorce in Later Life

Pensions are typically one of the most valuable assets within a marriage. It is therefore surprising that 71% of divorce settlements do not take pensions into account.

With the family home often being considered the most significant asset, it tends to dominate negotiations to ensure adequate housing provision for both parties. This can divert attention away from the parties’ future income needs bypassing any agreement in respect of pensions with insufficient consideration being given to retirement planning. 

Statistics reveal that there is a huge discrepancy between male and female pension provisions, with divorced women having a median pension pot of £32,640 vs divorced men who have a provision of £85,800. This is why it is important to obtain family law advice to ensure pensions are factored fairly into any financial settlement.

Pensions are often one of the most complex assets to deal with on divorce. Different schemes are valued in different ways, and the cash equivalent value does not necessarily reflect the income it will generate on retirement.

This is often why a Pension on Divorce Expert (PODE) needs to be instructed.

Subject to specific instructions, the PODE would analyse the parties' pension provision and provide recommendations as to how pension assets can be shared. More about what orders can be made in relation to pensions can be found here. 

It is important for parties to check their state pension forecast and National Insurance contribution record. While state pensions cannot be divided by the court like private or workplace pensions, they are still important considerations when assessing retirement needs. 

A clean break order extinguishes all financial ties between the parties.

In many cases a clean break is a desirable outcome, but when it comes to older couples divorcing later in life it may not always be suitable. 

If, for example, parties are reaching or have reached retirement age, there may be limited opportunity to build up capital assets, housing provision or pension income.

In cases where this applies, the weaker financial party is more likely to be reliant on spousal maintenance to meet their needs and address the disparity in income.

The court will always seek to achieve a fair outcome based on the specific circumstances of the case, and each settlement should be tailored to the parties' individual needs and resources.