Divorce costs £3,800 a year in retirement income, Prudential research finds

23/02/2018 News Team

Divorcees planning to retire in 2018 should expect their annual income to drop by £3,800 compared to people who have never been divorced, according to new research from Prudential.  

The insurer's  yearly research into finance and aspirations of people planning to retire in that year shows that the expected annual income in 2018 for those who have been divorced is £17,600, whilst those who have never been through a divorce receive an income of £21,400.

The research also reveals, that those who have been divorced are more likely to retire in debt (23 percent) compared to those who haven’t (16 percent), but divorcees will retire in lower debt (£30,500 compared with £36,900). 

Richard Collins, a family law partner at Charles Russell Speechlys, said: “The fact that divorcees tend to have lower debts than their married counterparts may be down to the courts encouraging a clean break between divorcing couples where a clean break is affordable. This allows divorcing couples to regain control over their own finances and consider how they want to plan for their separate futures.”

Divorcees are also more likely to have no pension savings when they retire. The research shows that one in seven (14 percent) who have been divorced expect to have incomes lower than the Joseph Rowntree Foundation (JRF) benchmark of  £9,998 a year, compared with the 12 percent who have never faced divorce.

Clare Moffat, a pensions specialist at Prudential, said: “Divorce can have a huge financial impact on people’s lives. Many may not realise that the cost of divorce can last well into retirement, as divorcees expect retirement incomes of nearly £4,000 less each year than those who have never been divorced.

“The stress of getting through a divorce can mean people understandably focus on the immediate priorities like living arrangements and childcare but a pension fund and income in retirement should also be a priority. A pension fund is one of the most complex assets a couple will have to split so anyone going through a divorce should seek legal and financial advice to help them do so. For many more couples, the increase in value of pensions mean that it is often the largest asset. It goes without saying that advice is crucial as early as possible in any separation where couples have joint assets.

Mr Collins added: “This research highlights the importance of divorced couples continuing to pay into their pensions even after a pension share on divorce has been implemented. Usually, a pension built up during the marriage is shared equally on divorce. If the divorcing couple are some way off retirement, this often gives the person receiving the pension share the chance to plan.” 

Analysed by Prudential, the latest divorce statistics from the Office of National Statistics showed that up to 2016, the number of people getting divorced has started to rise again and the greatest increase was for those over the age of 55 in 2016 compared to 2015.

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