Divorcees who plan to retire this year can expect their yearly income to drop by £3,800 compared to those who have never divorced, as experts say that people are less wary about divorcing as they approach retirement age.
A report found that those who have been divorced are more likely to retire in debt than those who have never been divorced, while around one in seven who have been divorced expect to have incomes lower than the Joseph Rowntree Foundation’s benchmark minimum retirement income of £192.27 a week, or £9,998 a year.
Prudential analysed the latest available divorce statistics from the Office of National Statistics and found that the number of people getting divorced has started to rise again and that those over the age of 55 saw the greatest increase in 2016 compared to 2015.
Clare Moffat, 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.”
The study also found that divorcees are more likely to have no pension savings at all when they retire than those who have not been through a divorce.
Naeema Sajid, family law partner at Scottish law firm Aberdein Considine, said: “In recent years we have seen a steady increase in ‘later-life’ divorces. This could be due to a number of factors including a change in social attitudes and expectations. Inevitably there will be financial consequences which, more often than not, will see the future finances of couples impacted.
“A couple’s financial dependence can be significant by this stage in life, which also brings additional complexity to what may already be a difficult and sensitive situation.”