'Overlooked' aspect of divorce sees people miss out on share of £4billion pot

Steven Smith & Kelly Ashmore
·2-min read

Divorcees are missing out on their share of a £4 billion pot due to one aspect being 'overlooked' during settlements. Despite a change in law in 2000, the majority of divorces finalised last year did not include pensions.

Pension expert Adam Pope, from Spencer Churchill Claims Advice, said around two in three couples failed to include them in settlements during 2023 - despite pensions often being the second most valuable asset. He said property was often the greater focus during the process, which left divorcees asset-rich but cash-poor in retirement.

However he said there were "strategies" to help people secure a fairer financial future after their separation. He said: "With an average age of divorce for women being 44 and a gender pay gap of 18.1 per cent at this stage, effective pension planning is key to bridging the financial gap."

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He continued: "Research highlights a growing trend of divorcees aged 65 and above, making it even more vital to address pensions in settlements. Failure to do so could leave you facing major financial challenges sooner rather than later. For instance, women who divorce later in their working life could miss out on an estimated £77,000 in their pension pot at retirement. "

The expert said a failure to include pensions in settlements meant "individuals could be missing out on a wider national pot of up to £4billion per year". He continued: "Despite a change in UK law in 2000 that meant pensions should be included in divorce settlements, only about one in three couples did so last year.

"All pensions, including workplace, personal, and state, should be considered in a settlement. It is particularly important to seek legal and financial advice if the ex has a valuable final salary pension scheme."

He said understanding the rules governing pension valuation and the advantages and drawbacks of each strategy, including offsetting, sharing, and attachment orders, was "vital". "Despite the importance of pensions, only about 30 per cent of divorcees include them, highlighting a widespread need for greater awareness on pension handling strategies," he said.

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