How to handle divorce in retirement
Ending your marriage can be even more financially crippling if you separate in your 60s or 70s. Laura Suter outlines the pitfalls
The number of people divorcing in retirement has risen in recent years, but this group needs to be aware of a litany of financial pitfalls as they divide a lifetime’s worth of assets. Figures from the Office for National Statistics show that between 2005 and 2015, the most recent full year for which data is available, the number of women over the age of 65 getting divorced rose by almost 20pc, from 4,654 to 5,554. The number of men of retirement age getting divorced increased from 8,059 to 8,697, an 8pc rise, over the same period.
But those who divorce in retirement today will have more entwined finances than those who divorce at a younger age – partly because they have spent more time together, but also because of generational differences that typically saw more non-working women in households previously.
Large pension pots, state pension entitlements, splitting large properties and inheritance tax bills are just some of the pitfalls to look out for, on top of the usual financial wrangling of divorce.
“Generally, older people will have more money in their pension pots,” said Mary Waring, of Wealth for Women, a financial advice firm that specialises in divorce cases. She said the issue was complicated by the fact that many couples reaching the age of 65 today will consist of a husband who worked, and probably has a valuable final salary pension, and a wife who did not work.
Pension assets can be split in three ways: the whole fund can be handed to one person, with the other spouse getting something of equivalent value from among the couple’s other assets; it can be “earmarked”, meaning that when money starts to be taken from the pension it is split between the spouses; or the pot can be split, known as “pension sharing”.
Jon Greer, the head of retirement policy at Old Mutual Wealth, said there were disadvantages with “earmarking” that had made it less popular in recent years. “For example, the pension