Why divorcing slashes 16% off your retirement income

THE cost of divorce stays with you for life, with the effects lasting well into retirement, a report said yesterday.

It found that a divorced person can expect a retirement income that is 16 per cent lower than someone who never divorced – an average annual loss of more than £3,000.

Married couples who split up are also much more likely to quit work with outstanding debts, the report by Prudential said.

Husbands and wives who part often pay for two homes instead of one and have to spend money on two families. That comes on top of the legal costs of divorce and the cash they must give to their ex-partner as part of a marriage settlement.

But the report found that someone who goes through divorce at the most common age for break-ups, their 40s, will not be free of the costs even 20 and more years later. In the longer term their income is likely to be affected, by outgoings such as maintenance payments and decreased earning power due to extra time spent caring for children.

Divorce laws introduced in the 1990s mean one spouse’s pension will be split between the two spouses on divorce in the same way as the rest of their money and property.

The report, based on a survey of nearly 11,000 people, said that a typical individual who has been through a divorce can expect a retirement income of £16,300 a year. However, someone who has never been divorced is likely to have £19,400 a year.

Among divorced people, 32 per cent are likely to arrive at retirement with debt. That compares to 21 per cent of those who are not divorced.

Clare Moffat of Prudential said: ‘ The financial impact of divorce can be devastating both in the short and longer term.’