Divorce and Your Finances: What Women Need to Know
Divorce can be one of life's most impactful experiences. Beyond the emotional toll, there can be real financial consequences that may shape your future for years to come, particularly if you're approaching retirement.
Recent research paints a concerning picture. Studies suggest women are twice as likely as men to reduce their working hours after divorce due to childcare responsibilities, and on average, their income may drop by around half compared to roughly 30% for men. [1] The pension gap can be even starker. Research indicates women in their 50s may retire with an average pension pot of around £39,654, while men of the same age could retire with roughly £84,205. [2]
Why pensions may matter more than you think
Pensions can be one of the largest assets a couple holds, but they could be overlooked during divorce. The Fair Shares study, the first nationally representative research into the finances of divorcing couples in England and Wales, found that only 11% of couples yet to retire had made a pension sharing arrangement. Over a third of people with a pension didn't even know what their own pot was worth, let alone their partner's. [3]
This matters because time out of work for childcare or caring responsibilities can significantly reduce what you're able to save for retirement. If pensions aren't properly considered during a divorce settlement, the long-term impact on your financial security could be considerable.
There are options that may be available. A pension sharing order allows pension assets to be divided between both partners as part of the settlement. Pension offsetting is another route, where one partner keeps their pension in exchange for the other receiving a larger share of other assets, like the family home. Both have their pros and cons, and what's right for you will depend on your individual circumstances, and you should always seek legal advice.
Getting financial advice early can make a real difference
One of the messages from the research is this: the earlier you seek financial advice alongside the legal advice needed, the better placed you may be.
Financial decisions made during divorce can carry lasting weight. In one case study, a woman chose to keep an overseas property for emotional reasons, giving up pension assets in the process. Years later, the property was rarely used and expensive to maintain, while her retirement position had been weakened. With earlier financial input, the outcome could have been very different.[4]
What to consider if you're going through a divorce
If you're facing divorce, or have recently been through one, here are some practical steps worth considering:
Get a clear picture of your finances. Understanding your income, savings, pensions and debts can help you feel more in control.
Consider seeking financial advice early. A financial adviser may be able to help you understand the long-term impact of the decisions you're making, particularly around the impact on pensions and retirement.
Review your important documents. Your will, Lasting Powers of Attorney, pension expression of wish forms and life insurance beneficiaries may all need updating, so seek legal advice on these.
Be kind to yourself. Divorce is emotionally draining. It's okay to ask for help, and getting the right support around you (both emotional and financial) could make a real difference to your future.
Looking ahead with confidence
With the right guidance and a clear plan, it may be possible to move forward feeling more in control of your finances and your future at this turbulent time. If you'd like to talk through your situation, send a message through to arrange a chat, or email hello@lockfs.co.uk.
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