The divorce rate for over 60s has spiked, according to the Office for National Statistics. They say the number of retirement-age men throwing the towel in on their marriages has risen by 73 per cent, and spiralled by 82 per cent for women since 1991. The figures have come despite overall divorce rates falling by 26 per cent over the same period.
But experts warn that divorcing late in life often leaves both parties worse off financially. The average expected income for those retiring this year has already slumped to a six-year low of £16,400, but Prudential figures show divorce cuts this by a further 16 per cent, bringing the average for divorcees to just £13,800.
Clare Moffat, pensions specialist at Prudential, said: "Women’s retirement incomes are particularly vulnerable to the financial effects of divorce. And a pension fund is likely to be one of the largest and most complex joint assets to be split."
So what steps should you take to check you’re getting a fair deal if you’re getting divorced later in life?
If you're pre-retirement
The value of money-purchase pensions is only decided when you take an income from them. This means that when they are split before the person who has built up the pension has retired, they are rarely divided 50/50. Investment-linked pensions grow more the longer you leave them, so if your spouse is younger than you, their chunk will be worth more when they finally retire (provided you retire at the same age). This has to be factored in when splitting the pension - although nothing is guaranteed because the investments and annuity rates could change a lot in a few years.
If it's a defined-benefit pension you're splitting, you'll be asked to fill in a form stating your other assets first. Then an actuary will work out the future valuation of each person's share of the money - factoring in the deficit of the scheme. This variable impacts the current estimate of the future value of the money, and means it is sometimes better for the person whose pension it is to give the spouse equivalent assets from somewhere else in their estate. This means that if the scheme's funding position improves in the years leading up to retirement, the spouse will get a much better deal out of it.
If you've already retired
If you’ve already retired then you’ll be looking at splitting the income stream from your pension(s). How much you take for yourself depends on the other assets you both have to your name. If you ticked the box to say your spouse gets your pension if you die - until they die - you can't un-tick it. And if you divorce your spouse they are no longer eligible to receive the benefit - so you will lose it, according to Mike Carpenter, co-director at Carpenter Rees. And you can’t pass the benefit on to anyone else because your partner’s age will have been factored in when the deal was made.
If you've pooled your assets to save tax
Before Christmas, Investors Chronicle reported that tightening wealth laws mean personal assets such as inheritance, property or share portfolios acquired before a marriage (called non-marital assets) are becoming more difficult for spouses to seize in a divorce settlement, which will come as reassuring news for married individuals with significant personal wealth.
But if you've tactically shared assets with a spouse as part of a tax reduction exercise, you have unwittingly removed the ringfence that would have protected those assets from having to be shared in the event of a divorce.
It's well worth knowing that, unless you’ve signed a prenuptial agreement, tax planning is not a defence in court when trying to separate assets in a divorce.
Marital assets are normally divided equally on divorce. They are assets and pensions which have been built up during a marriage. The law does not make a distinction between the efforts of a breadwinner or a homemaker, so assets accumulated from one party's business or employment will fall into this category.
Non-marital assets are defined as assets acquired by family gift or inheritance, or owned by one party prior to the marriage.
Where an equal division of marital assets leaves each party with enough to meet their needs, non-marital assets will not be divided equally but will be left with the party who owns them.
Keep it amicable
It sounds obvious and it's often easier said than done, but avoiding legal battles will save you thousands of pounds. If you're finding communicating with your partner difficult, using a mediation service to resolve your issues is much cheaper than going to court.
Free advice on divorce is available from The Pensions Advisory Service: Tel 0845 6012923 or www.pensionsadvisoryservice.org.uk.
