When marriages break down it can be tough both emotionally and financially as lives are separated along with everything that connected the couple. Whether it is where to live or how to navigate life as a single parent, just getting through the initial stages can be a struggle.
And for many people, often women, the financial future can look bleak, especially if they have given up their careers to stay at home with the children. This often means the working person will have a healthy pension pot while their stay-at-home or reduced hours partner will have minimal, if anything put aside for their retirement.
Read more: Holidaymakers warned ‘protect yourself’ if heading to popular winter travel spot
Read more: Government issues update on ‘blanket restrictions’ for young drivers in UK
The government this month announced changes to tackle the imbalance for millions of women working in local government. From April millions of women will see their pensions improve under reforms being introduced including those working on the front line, serving school lunches, cleaning buildings, managing libraries, and cleaning streets.
Measures include making gender pension gap data reporting statutory and making unpaid additional maternity, shared parental and adoption leave automatically pensionable. Around three-quarters of the scheme’s near seven million members are women and one of the most significant causes of the gender pension gap is due to maternity leave.
However there is another problem many women face and that comes when they divorce from their partner as many will have lost out on pension payments as a result of giving up work or reducing hours when they had children. And when it comes to a financial settlement in a divorce it can be easy to overlook this if trying to make the separation as easy as possible.
The money could make a difference in later life (Image: Getty)
Natasha Grande, a partner at G&G Law, says it is essential that pensions should not be overlooked when coming to an a financial agreement in a divorce. She said: « Clients and lawyers alike can be guilty of ignoring pensions.
« In divorce clients can focus on other assets, wanting cash now rather than planning for the future. Pensions can be seen wrongly as the personal property of the person who generated the pension fund, which is not what the law says.
« The gender gap is stark in our cases as you see men divorcing in their 60s who have amassed pension pots with far higher values than women. This shows the trend of the old-fashioned working pattern, where men were able to have uninterrupted careers building up their pension pot, whilst either women took time off to look after the children or did not work at all.
« Pension sharing on divorce only came into effect on 1 December 2000 in the Welfare Reform and Pensions Act 1999, before that you could only offset. PAG 2 (Second Edition of A Guide to the Treatment of Pensions on Divorce, written by the Pension Advisory Group, and published in 2024), endorsed by the President of the Family Division acknowledges that with changes in society there is still work to be done.
Natasha Grande has advice for women who are separating from their husbands (Image: G&G Law)
« Lawyers who ignore pension assets when advising clients do so at their peril. A disclaimer is not enough, to relieve the lawyer of the responsibility of ensuring that they have advised a client appropriately that a marital pension pot should be included in any financial settlement. Pensions can be a useful tool for tax planning.
« Expert advice from a pension actuary is money well spent. Also involve a financial advisor, if the pension is being reinvested and a barrister with the right kind of expertise. Offsetting cannot be ignored, as generally the English courts cannot make an order over an overseas pension with a few exceptions.
« There are many methods by which a pension can be valued in England and Wales for offsetting, PAG 2 cites 6 different methods for valuing a pension for offsetting. It also has many different methods for division of a pension. To ensure that the pension gender gap is narrowed, lawyers need to safeguard that the type of pension, whether it is being shared or offset, is valued in the appropriate way in accordance with the facts of the case.
« There is no mathematical answer, pensions are a complex area to value and treat properly in a divorce and you need to have the right expert on speed dial. Lawyers must be clear with clients on the value added to them of taking expert advice. »
