Women urged to consider pension sharing orders in divorce to avoid poverty in retirement
Expert reveals tips on how to save for retirement
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With women living longer than men, it is imperative that they stop underestimating pensions in divorce settlements as it can amount to a substantial amount of income to live on during retirement, an expert suggested. Jim Richards, Senior Associate at Winckworth Sherwood said: “It is imperative that if pensions are a significant resource within a divorce settlement, time should be taken to consider how this should be shared fairly.
“Fairness means providing equality of income in retirement and reflecting the differing contributions which are made by the respective parties during a marriage.“
Recent research from Manchester University showed that in only 12 percent of divorce settlements were pension sharing orders made.
As a result, the position that divorced women find themselves in remains uncertain, he explained.
With 40 percent of women in retirement living in poverty, it has been suggested that prioritising a pension within a divorce is just as important as the property assets.
With a pension income being received women may be able to lead more stable lives in retirement.
The distinguishing characteristic as to why more women fall into poverty is that their former husbands, generally speaking had far better pension provision and fewer lived in poverty in old age.
Mr Richards explained the value of pension sharing orders as a way for women to receive fairness and equality in divorce proceedings.
Pension sharing is one of the options available on divorce or the dissolution of a civil partnership.
It provides a clean break between parties as the pension assets are split immediately.
This means that each party can decide what to do with their share independently.
He continued: “The fact that one person has worked (generally the husband), while a wife may have given up her career, raised children, and not contributed to a pension fund is something which the courts can, and will, take into account if a financial application is made.
“A pension sharing order takes money from one fund and creates a separate fund in your name, as though you had actually paid into the fund.
“It can then be drawn down according to the rules of the scheme you opt to invest in.”
The Court will issue a pension sharing order (PSO) which states how much of the pension, the ex-spouse or partner is entitled to receive.
The amount is expressed as a percentage of the transfer value(s) of the pension(s) that are to be split. In Scotland, it can also be expressed as an amount.
For example, if the value of the pension was £100,000, a 50 percent share would give each person £50,000 each.
Each final transfer value is worked out the day before the pension sharing order comes into effect.
Mr Richards suggested that people should take expert advice at an early stage from a team of lawyers, actuaries and financial advisers.
This will help people navigate through the stress that financial settlements can often present.
He explained that failing to do this could result in the level of poverty which has been described at length for many years now and that can be avoided if the circumstances allow it.
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