A recent report looking into the interplay between pensions and divorce revealed some quite alarming results. The report, produced by the Manchester Institute for Collaborative Research on Ageing (MICRA), analysed the pension wealth of nearly 30,000 people over 30.
The report illustrated the unequal distribution of pension wealth between husbands and wives. By way of example, for the age group 55-64, married men have median pension wealth of about £185,000 compared with just £55,800 for married women. Moreover, the findings revealed that on average women only have about 25 per cent of a couples’ accumulated pension wealth, and this varies little according to age.
Since December 2000, it has been possible to share pensions on divorce and the same powers were extended to Civil Partnerships in 2005. Yet, based on court statistics from 2019, MICRA estimated that at most only 12% of divorces result in some sort of pension division. This begs the question - given the disparity in pension wealth, why are more pensions sharing orders not made?
Of course, it is open to parties (and the Court) to offset pension wealth against other assets when dividing assets on divorce and it is likely that many parties prioritise receiving liquid assets to meet immediate needs, such as housing. However, after property, pensions are often the most valuable asset couples own. It is important not to overlook the importance of making provision for retirement, which could have a considerable impact on finances later on in life (particularly so for women).
There are also considerable pitfalls in not obtaining proper evidence of pension values as not all pensions are valued on the same basis. In cases involving complex or very valuable pensions, a pension expert ought to be instructed to calculate how pensions can be divided so as to create equal capital values or equalise pension income on retirement.
Pension wealth is very unequally distributed. About 28 per cent of those over 30 have no private pension wealth at all.