'Overlooked' opportunity sees people 'miss out' on pensions boost

Divorcees are missing out on billions in pension assets because pensions are overlooked in many divorce settlements, according to an expert. Pension expert Adam Pope, from Spencer Churchill Claims Advice, said there were strategies to help people in the situation to secure a fairer financial future after their separation.

He said: “Considering that about 60% of divorces do not include pensions, divorcees should understand the strategies available. With an average age of divorce for women being 44 and a gender pay gap of 18.1% at this stage, effective pension planning is key to bridging the financial gap.

"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. "

Importance of pensions in divorce settlements

Adam said: "Pensions are often overlooked during divorce, even though they can help secure financial stability after the separation. About 70% of divorcing couples are not including pensions in their settlements, meaning individuals could be missing out on a wider national pot of up to £4billion per year.

"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. Pensions are often the second most valuable asset after a home, but property is often the greater focus during the divorce process, leaving divorcees asset-rich but cash-poor in retirement.

"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.

"Understanding the rules governing pension valuation and the advantages and drawbacks of each strategy—offsetting, sharing, and attachment orders—is vital. Despite the importance of pensions, only about 30% of divorcees include them, highlighting a widespread need for greater awareness on pension handling strategies."