What should you do about pensions when divorcing?

University of Manchester, Cognitive Media, ESRC

Today is pensions awareness day.

One area of pensions I have never covered is divorce. So it was great when my friend Debora Price dropped me a line with some good advice on what you should be doing if you are going through a divorce right now.

Deborah price

The video is worth watching and here’s what Debora wrote me.

Divorce is a very emotional time for couples.  It is especially difficult for them to think about pensions, and often, the person with the larger pension – almost always the husband – does not want their pension to be shared as an asset in divorce.

Women are often very focussed on keeping their homes for themselves and the children and are often prepared to give up quite a lot to secure that. Pensions are also complex and horrible to think about, and if you do think about them you very often end up needing to pay legal and financial advisers to give you advice about them, which people don’t want to do. This creates a lot of pressure to ignore the pensions.

  • Its expensive to get pensions valued and people don’t want to spend the money; they don’t realise that it may be money well spent, as they may be very surprised at how valuable the pensions are.

  • People are usually are in their 30s and 40s when getting divorced and much more important to them at the time is sorting out the house and kids. They often tell their solicitors to ignore the pensions, even where it is in their best interests to have them included,  Even if parties go to court, if they present an agreed settlement to a judge, the judge is likely to approve it even if the pensions have been ignored.  This is because judges don’t want to upset an agreement that has been reached between divorcing couples

  • This problem is widespread and can leave women very vulnerable to poverty in later life.

Debora and her team at Manchester University have done research into the attitudes of people going through a divorce, I find these observations interesting.

  • They don’t think about pensions (this is true across society)

  • If they are told to, they resist

  • If they are told to think about their later life at all, they just shut down their thoughts

  • They often just want to keep the peace

  • They need to get through their divorce as smoothly as possible

  • They want the least possible conflict

  • They have no idea how important it is

  • They have no idea how large an asset the pensions are

  • They don’t want to spend any money on lawyers

  • They don’t want to spend any money getting valuations and financial advice

  • They don’t want any delays to their divorce

  • The men mostly want to keep their pensions and not share them with their soon to be ex-spouse

  • Women are often very focussed on keeping the home and will give up pension rights to do that

  • Divorcing parties want a clean break between them

  • They don’t want a court battle

Debora wants pension people to be aware and to take action

  • To tell people that the pensions are hugely valuable, often more valuable than the house
  • To tell people that they really must gather proper information about the value of pensions in their divorce, the same way they would about any other asset or their income
  • To create a narrative that says it is the right thing to do (morally) to include the pensions in order to get to a fair agreement and that is an unjust thing to do to ignore them
  • To help people build their own arguments for not ignoring the pensions, to withstand some of the emotional pressure that they will come under
  • To help people understand that the money that may need to be spent on advisers is almost always worth it as there are many traps they can fall into if they don’t

And to get those going through divorce to be aware and take action

  • Realise there is a pension/more than one pension
  • Get a proper valuation for the pension before you make up your mind
  • Think about the pension the way you would think about other assets and income from the marriage
  • It’s fair that pensions are put in the pot
  • You may well need advice about all that – it’s worth it
  • Stick to your guns if you think you should have a pension share – it’s important

Issues for lawyers and policy makers on pensions and divorce

There are approximately 95,000 divorces each year in England and Wales, with rates highest for people in their 40s.  Divorcing parties will resolve their finances either informally by agreement, with the help of mediators or lawyers, or in a contested case before a Judge.

If acting by themselves or with lawyers, it is open to them to file their agreement with a court, ensuring that it is binding and puts an end to any potential further argument over money and assets.  What parties often don’t realise, and this issue is dealt with very inconsistently by lawyers, is that their pensions may be the largest asset, often bigger than the amount of equity in the house.  Agreements are reached often without people knowing the facts and without seeing the figures, and this is the case even in some instances where lawyers are involved.

In 2000, the law changed to permit pensions to be shared on divorce, primarily to address concern over the poverty of older divorced women.   The aspiration at the time of policymakers and NGOs was that this would happen in every case, however this was never going to be how the law would operate, and it clearly has not operated that way.  We know from official statistics (https://www.gov.uk/government/statistics/family-court-statistics-quarterly-january-to-march-2019)  that as at 2019, at most, 12% of divorces results in some pension division.

We know that men have very emotional attachments to their pensions (Karen Rowlingson showed this: https://doi.org/10.1017/S147474641100042X) and we also know that  solicitors report that they are often instructed by wives they are acting for to drop the case against the pension as the emotional and personal costs are too high (references: Pension Advisory Group reports on focus groups and online survey that will shortly be uploaded to the Pension Advisory Group (PAG) website: https://www.nuffieldfoundation.org/pensions-divorce-interdisciplinary-working-group).

Hilary Woodward and colleagues (2014) (http://orca.cf.ac.uk/56700http://orca.cf.ac.uk/56702) showed in their study of 369 divorce court files that the fairness of pension outcomes was questionable in a significant proportion of the caseload examined.  People often see the house vs the pension as a trade-off but they do this in many cases without even finding out what the pension is worth and also without thinking about how they are going to live in later life.

Also, in a very influential article called “Apples or Pears” https://www.familylaw.co.uk/docs/pdf-files/Apples_or_pears_-_Pension_offsetting_on_divorce.pdf Rhys Taylor and Hilary Woodward showed that the valuing of pensions in divorce cases was incredibly inconsistent across the country.  This body of work led to the formation of the Pension Advisory Group (link above) which produced a very substantial report in July (I was one of the lead authors of that report).  I am sure Rhys or Hilary would also be very happy to talk to you.

These are matters of great concern to those with an interest in women’s financial resilience and security in later life.  This problem has resulted in the formation of the PAG as above endorsed by the President of the Family Division and the Family Justice Council; Insuring Women’s Futures formed a Pensions on Divorce working group under Jackie Leiper ; Age UK has published a recent report on the issue https://www.ageuk.org.uk/latest-press/articles/2018/september/women-losing-out-on-money-in-divorce/ ; and the organisation Surviving Economic Abuse is working on providing national guidance on the issue.

When Debora Price last  investigated  this issue, divorced women’s poverty rates in later life were profoundly high exceeding 40% – this was a while back and there isn’t any up to date data on this.  Using 2006 data, she  further showed that for all women being divorced and widowed significantly increased the odds of being in poverty and dependent on the state for income after pension age; and for women who had ever been mothers, divorce after age 45 especially substantially increased the odds of women being in poverty.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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1 Response to What should you do about pensions when divorcing?

  1. Robert Davies says:

    A key issue here is the difference in valuations between public sector and private pensions. Because HMRC undervalues public sector pensions similar projected incomes may be differ by as much as 50%.
    So where a divorcing couple may have one that is a public sector employee and one that is a private sector employee the disparities in CETV may be huge even though the ultimate pensions may not be that much different.

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