Research recently undertaken by Aviva suggests that one in six divorced people didn’t realise their pension could be impacted by separating from their spouse. Furthermore, 8% of divorcees didn’t have their own pension savings and had been relying on their spouse for retirement.
This research is a timely reminder that it’s essential for divorcees to take proper advice on pension provision as part of any financial settlement. It could well be a huge mistake to overlook the significance of pension provision when going through a relationship breakdown.
The recent introduction of No-fault Divorce in April means that married couples or those in a civil partnership can divorce without the need to apportion blame. This recent change in law is a positive step forward for those wishing to divorce, as the end of the blame game ensures separating couples aren’t required to set out examples of unreasonable behaviour or allege adultery. This often sets the wrong tone and distracts those involved from the importance of financial settlement. We now have a much better and more dignified system of divorce in England and Wales.
The new divorce regime is to be celebrated, but it doesn’t mean that prospective divorcees can bypass the difficult matter of wider financial settlement, including pension matters. It’s clearly beneficial for all to obtain legal advice to ensure they understand the issues at play and the parameters of settlement.
We’re certainly in a period of flux with regard to pensions, the financial markets are far from steady and wider geo-political matters are certainly making the valuation of pensions difficult. We’re finding values change rapidly and clients need to be mindful of this and take proper advice. There is clearly an issue if pension values are uncertain and unstable, especially when Aviva’s recent research suggests many prospective divorcees are not fully aware of the importance of pension provisions accumulated at the time of separation and or to be accumulated moving forward.
It’s not uncommon for one spouse to have larger pension pot compared with their partner. It’s also not unusual for valuations of pensions to be misunderstood. True values of a pension can be hard to establish, sometimes benefits aren’t clear from simply the value attributed to a scheme on an annual statement. It can even be the case that pension statements for different schemes look, at first glance, to have the same value but they are far from equal. Specialist advice supports the process of establishing the real value and benefits of a scheme.
If you know your spouse has significant pension provision, getting the right advice and support to truly understand the value and benefits attached to the pension(s) is vital.
It’s often the case, especially for clients edging towards retirement, to have accumulated a significant pension pot, and it’s often the most valuable single asset held when couples separate.
This new research is alarming and highlights the real need for divorcees to seriously consider their pension provision. Divorcing couples should seek proper advice which considers both their own and their spouse’s specific pension arrangements.