Divorcees don’t forget retirement

Feeble forgetful female? Not me and so Imogen Tew's report (FT Personal Finance( 22/10) on women receiving fair pension outcomes on divorce requires a post.

Apparently, St James's Place had established by an FOI request ( of whom?) that between 2016 and September 2021 , fewer than one in seven consent orders where parties negotiated their financial claims on divorce either themselves or with legal input included any order sharing or splitting or earmarking a pension scheme. So only 80,290 out of 602,491 - just over 13% agreed to such an order. This was compared with 'about 40%’ - so say about 240,996 who also obtained such orders but did so through contested proceedings . So the couple went to court and argued over finances and a judge imposed a decision.

First the headline "divorcees forget about retirement" could not have been more misleading and unhelpful to those who may be worried that they missed a trick or should have received something which they had not. Nobody bringing their marriage to an end, male or female, employed or having worked in the home during the marriage " forget" about retirement. Most are concerned as to how they will make ends meet upon separation - how will they rehouse, pay bills, educate children, save the future as well as plan for their retirement. The idea that women, who may indeed have smaller pension pots as they have not been the higher or uninterrupted earners in the marriage ,’ forget’ about their retirement is insulting.

Secondly and by way of reassurance, since 1973 the court (who ultimately approves any financial outcome between parties whether negotiated by consent, through mediation or arbitration or at the end of a contested hearing) has to consider the needs of both parties and all the resources in the family ( including pensions) and divide them fairly. That is a discretionary balancing act. Judges do not 'forget' the retirement of divorcing wives either but immediate housing and income are prioritised.

Orders are neither agreed nor imposed without both parties and a judge understanding “ what “ there is to divide – including pensions or how people will live in their retirement. Quite a lot of time and trouble is taken to understand the cash value of a pension or what it might produce on retirement date taking into account the ages and tax status and state pensions of parties. Some pensions can’t be shared by an English court anyway. Frequently pension actuaries have to be hired to calculate what percentage split might create equal income upon retirement.

The article did mention other options including earmarking ( receiving income from the other spouses pension pot when they retire, rather than a pension share when a sum is debited from their pension and credited to the seeking spouse's pension pot) and "offsetting" ( one person having more than another type of asset - often the whole of the matrimonial home until the youngest child leaves school, when they are expected to move to smaller home to release funding for their retirement) but no FOI request could demonstrate why certain financial deals were agreed to.

Parties, their advisers and ultimately the court will always consider if the deal or decision is legally fair and that includes considering where it leaves parties upon retirement.

Retirement may not be such a concern for those under 40 , especially when retirement ages are climbing and many divorcing have to use their pension resources in creative ways to release cash to meet more immediate needs rather than provide for their future.

Thirdly, this piece should not encourage spouses to fight in court over pensions. There is widespread support from Government and Sir Andrew McFarlane head of the Family Division of the court for spouses not rush to court to fight over money. Mediation , arbitration, collaborative approaches all leading to a consent order is faster and cheaper than a court case and includes taking into account pensions and retirement provision. Less conflict in the family provides better outcomes for the children too.

All parties to a divorce should have access to good legal and financial advice to make informed decisions about their financial future .

Forget fear and face the future.