Divorced retirees more likely to rely on the state pension
Thousands more divorcees depend on the state pension compared to those in a marriage as the financial impact of separation continues to ripple into retirement across the UK.
Nearly 70 per cent of divorcees rely on the state pension for their main source of income after leaving the workforce, compared to 45 per cent of married people, according to analysis from Interactive Investor.
Meanwhile, just 21 per cent of divorcees relied mainly on their private pension, while under four per cent relied on a personal pension or a SIPP.
Divorcees were also more unlikely to be given inheritance, with only 13 per cent being gifted funds in the last three years, compared to 23 per cent of married people.
Pensions and proceedings
Divorce can have a significant impact on pensions because they are considered a joint marital asset, meaning they are typically split to ensure a fair financial settlement, with courts considering factors including marriage length and children.
However, according to the Pension Policy Institute, only 11 per cent of divorces in the UK over the last two years involved pension attachment orders, which allow the division of pensions, leaving thousands without critical retirement funds.
Only a quarter of divorcees are expected to have saved over £100,000 in pension wealth for their retirement, compared to 52 per cent of married people, emphasising the financial drag ending a marriage can cause.
Craig Rickman, personal finance and pensions expert at Interactive Investor, said: “Getting divorced can cast a long financial shadow, even into later life.
Although it’s possible to rebuild wealth after a divorce, getting back on the housing ladder or beefing up a pension can be tough, particularly for single parents.
The unfortunate reality is that many individuals don’t get a fair outcome during divorce negotiations.
“It’s a perfect storm because they are often under immense emotional and financial strain, at a time when decisions and outcomes could affect their finances for years to come.”
Widow pension reliance
Widows were also reliant on the state pension to afford retirement, with a staggering 71 per cent doing so, with only 21 per cent using a workplace pension to mainly fund their later years.
Female widows in particular are also more at risk of being over-reliant on the state pension, due to typically having lower private pension wealth to fall back on upon a partner’s death compared to men.
This has been credited to the likelihood of women leaving the workforce for caregiving duties, having a lack of access to private schemes and lower lifetime earnings, leaving them pension wealth.
Protect your wealth
While splitting up can dwindle your retirement fund, there are other ways to boost finances for later life, regardless if you are divorced, single or married, including keeping focus on building long term wealth.
Rickman said: “If you’re going through a divorce, you may feel like you’re starting from scratch with your finances. That’s why it’s important to sit down, take stock of your changing circumstances and work out what you can do to improve your future wealth.
“Making small and regular steps can be easier than a dramatic overhaul and the long-term impact can be just as effective.
“Tasks like creating a budget, increasing your savings or investing regularly can transform your finances over time, especially if you review and fine tune your affairs at frequent intervals.”
Keeping on top of financial affairs is also “vital” in ensuring your retirement pot is full, with many people guilty of leaving their money sitting idly in current accounts.
Rickman urged Brits to take the time to tup assets, including savings, investments and pensions, with investing likely to “grow your money faster than inflation” and potentially outpace property prices.