Bridging the Pension Divide: How to get a fair divorce settlement

Introduction

Divorce can be an emotionally and financially tumultuous experience, especially for women. One of the most overlooked aspects of divorce settlements is the division of pension assets. Estimates suggest that UK women are missing out on a staggering 2-4 billion in pension savings each year due to inadequate consideration of pensions during divorce proceedings. This alarming trend highlights a pressing need to address the gender pension gap and ensure that women are not disproportionately disadvantaged when their marriages come to an end, spotlighting the critical issue of pension inequality.

The Pension Pitfall: Understanding the Scale of the Issue

The complex nature of pension schemes and the tendency for divorcing parties to prioritize more tangible assets, such as the family home, have contributed to this significant oversight. Research indicates that over a third of divorcees are unaware of the value of their own or their partner’s pension savings. This lack of awareness can have severe consequences, particularly for women who, on average, have significantly lower pension pots compared to their male counterparts, underscoring the importance of understanding one’s pension scheme.

The Gender Pension Gap: A Persistent Challenge

The gender pension gap is a well-documented phenomenon, with women’s average pension savings at retirement age (67) standing at 69,000, compared to 205,000 for men. This disparity is often exacerbated by factors such as career breaks, part-time work, and the gender pay gap. When these factors are combined with the overlooking of pensions during divorce settlements, the financial implications for women can be devastating, affecting both their retirement savings and pension pot.

Pension Splitting: A Vital Step Towards Equality

Pension splitting, or the division of pension assets as part of a divorce settlement, is a crucial step in addressing this imbalance. By ensuring that pensions are given due consideration alongside other assets, such as the family home, women can secure a more equitable financial future. However, the uptake of pension splitting remains low, with estimates suggesting that around 60% of divorces do not involve this crucial step, highlighting the need for a splitting order.

Navigating the Complexities: The Role of Financial Advisers

Financial advisers play a pivotal role in guiding clients through the complexities of pension splitting. They can help clients understand the value of their pension assets, the implications of different settlement options, and the long-term financial consequences of neglecting pensions during the divorce process. By proactively raising the importance of pensions and providing tailored advice, advisers can empower their clients to make informed decisions that safeguard their financial wellbeing, offering essential pensions advice.

Bridging the Awareness Gap: Educating Clients

One of the primary challenges faced by advisers is the lack of client awareness regarding the significance of pensions in divorce settlements. Many clients, particularly women, view pensions as too complicated to bother with, preferring to focus on more tangible assets. Advisers must take a proactive approach in educating their clients, highlighting the long-term implications of overlooking pensions and the potential benefits of pension saving.

Collaborative Approach: Working with Legal Professionals

Advisers can further enhance their impact by collaborating with legal professionals specializing in divorce proceedings. By establishing strong working relationships with solicitors and divorce coaches, advisers can ensure that their clients receive comprehensive support throughout the divorce process. This collaborative approach can help navigate the legal complexities of pension splitting and ensure that women’s financial interests are prioritized.

Overcoming Emotional Barriers: Addressing Client Concerns

Divorce can be an emotionally charged experience, and clients may be reluctant to engage with the intricacies of pension splitting due to fears of ongoing financial entanglement with their ex-partner. Advisers must be prepared to address these concerns sensitively, educating clients on the differences between pension splitting and attachment orders, and emphasizing the long-term benefits of securing a fair division of pension assets.

Leveraging Industry Resources: Empowering Advisers

To better support their clients, advisers can leverage a range of industry resources, such as those provided by Advice Now and the Resolution website. These organizations offer free information and guidance on pension splitting, helping advisers stay up-to-date with the latest developments and best practices in this specialized field, enhancing the quality of pension advice services.

Regional Considerations: Tailoring Advice to Local Contexts

The value of pension assets can vary significantly based on the client’s geographic location and the industries prevalent in their region. Advisers must be attuned to these regional nuances, being mindful of the potential presence of high-value pension schemes, such as those in the banking, military, or manufacturing sectors. By understanding these regional factors, advisers can provide more targeted and effective advice to their clients, ensuring they are well-informed about their pension scheme.

Addressing the Systemic Challenges: Advocating for Change

While individual advisers can make a significant difference in their clients’ lives, addressing the systemic challenges that contribute to pension inequality requires a broader, collaborative approach. Advisers can play a role in advocating for policy changes and industry initiatives that prioritise the equitable division of pension assets during divorce proceedings, ultimately driving systemic change and ensuring a more level playing field for women.

The OLS Advantage: Prioritising Pension Sharing

At OLS Solicitors  we recognize the critical importance of pension sharing in divorce settlements. Our team of experienced legal professionals works closely with financial advisers  to ensure that our clients’ pension assets are given the attention they deserve. By leveraging our in-depth knowledge of pension fund management and the nuances of regional pension schemes, we are uniquely positioned to secure the best possible outcomes for our clients, empowering them to build a secure financial future post-divorce.

Conclusion: A Call to Action

The alarming gap in pension savings experienced by women during and after divorce is a pressing issue that demands immediate attention. By raising awareness, educating clients, and collaborating with legal professionals, financial advisers can play a pivotal role in bridging this divide and empowering women to achieve greater financial independence. Through a concerted effort to prioritize pension sharing in divorce settlements and promoting automatic enrolment, we can work towards a more equitable future, where women’s long-term financial wellbeing is safeguarded, and the gender pension gap is finally addressed.