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Divorce: Making the most of your home and your pension – Legal and General Financial Advice

by: Sara McLeish, CEO of Legal and General Financial Advice
  • 11/03/2022
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Divorce: Making the most of your home and your pension – Legal and General Financial Advice
The pandemic placed an enormous strain on many couples, with a perfect storm of stress, uncertainty and prolonged periods in lockdown putting many relationships to the test.


It is inevitable that such pressures have increased separations and, according to The Office for National Statistics (ONS), men and women over 60 are getting divorced at higher rates than in the past.  

The cost of splitting up can be significant and it is important that divorcing couples are aware of the impact it can have on their finances, particularly when nearing, or in, retirement.  

As most people (74 per cent) aged over 55 in England own their own property, dividing up the family home fairly is usually the key consideration for couples when separating.  

But, like pensions, the home is not a straightforward asset that can easily be divided.  


How mortgage finance can help 

Using the equity that’s accumulated in the home can be a solution. Lifetime mortgages can help pay off the existing mortgage and, potentially, release additional funds to aid the financing of a new home.  

The equity release market has come on leaps and bounds in recent years, with more flexible products and cheaper rates and may be a useful option for couples to consider. 

As well as the value of the home, couples may have pensions and savings to consider. With fresh financial challenges on the horizon, from the rising cost of living to the suspension of the triple lock, ensuring a fair settlement in a divorce is vital.  

Research conducted by Legal and General in 2021, found that just 12 per cent of UK adults aged 50 and over who are divorced, properly considered pensions when splitting up. In fact, a quarter of couples actively waive their rights to pension wealth, despite the fact that individuals may be entitled to their ex-spouse’s pension, and it could be worth more than the shared value of property. 


The gender finance gap 

Additional research published by the Manchester Institute for Collaborative Research on Ageing (Micra) and the Pensions Policy Institute, found that married men aged 55 to 64 have more than three times the pension wealth of married women of the same age. 

By and large, women tend to live longer than men and throughout their lives are more likely to experience gaps in their pension savings due to childcare responsibilities, which leads to pension inequality in later life.  

Debora Price, professor of social gerontology at the University of Manchester, and one of the experts who worked on the report explained: “The pensions world is complex and ever-changing and, unfortunately, divorce traditionally damages women’s finances more, in comparison to men. Pensions are never in joint names and equal provisions are not often discussed.  

“In divorce, a common choice is for the woman to keep the family home and the man to keep the pension. He will continue saving into his pension, but she may focus on paying off the mortgage. When they both reach 60, it’s likely he’ll have a house and a pension. She may have a house but no pension and will have to keep on working for much longer into retirement, or face a parlous future, filtering in any health or other misfortunes could leave her in a very tough place.” 

A long-awaited change in legislation, bringing in ‘no fault’ divorce, comes into play in April, potentially reducing conflict for many couples. But this change could make consulting a financial adviser, as well as a solicitor, even more important to help ensure all financial elements at play are fairly considered and divided.  

It will never be easy to prepare for a divorce, but timely and high-quality financial planning can help to support both parties to make the right decisions and avoid any nasty surprises down the line. 


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