Divorced men aged between 55-64 have on average five times more in pension savings than divorced women the same age.

According to research conducted by the University of Manchester Institute for Collaborative Research on Ageing, supported by the Pensions Policy Institute, divorced non-cohabiting men in this age group had average pension savings of around £100,000, compared with just £19,000 for divorced women the same age.  Divorced women not cohabiting in their late 60s have less than 30% of the pension of equivalent men.

Married men have the highest pension wealth. For the age group 55-64, married men have an average pension wealth of about £185,000 compared with £55,800 for married women.

The report said: “Divorced men and women have less pension than their married equivalents. But with substantial gender disparities we find divorced women’s pensions are worryingly low. Divorced women with dependent children, even if employed, remain less likely to be contributing to a pension, which may further compound the disparities in pension wealth.”

There are approximately 100,000 divorces each year in England and Wales, with rates highest for people in their 40s. Women who remarry following divorce end up with significantly lower average pension wealth than men who remarry. At age 45- 54, men in second marriages have average pension savings of £68,000 compared with women’s £30,000, and at 55-64, men in second marriages have £162,000 compared with women’s £50,000.

Separate research by equity release lender more2life and the Centre for Economic and Business Research found that two in five (39%) women said they had lost out on the retirement income they receive or expect to receive as a result of splitting from their partner. This is compared to the 21% of men who believe their retirement income had been negatively affected by divorce.

Pensions and divorce: what are the rules?

Laws changed in 2000 so that pensions could be shared on divorce, with the aim of preventing divorced women spending their retirement in poverty. However, pension sharing can only be achieved with a court order, with official statistics suggesting that as of 2019, at most, only around one in 10 (12%) of divorces result in pensions being divided.

Pension sharing, as the name suggests, involves splitting pensions at the point of divorce. The aim is that each partner will then have their own pension pot going forward, with the amount expressed as a percentage of the transfer value of the pensions that are being shared. One of the main benefits of this approach is that it allows couples to have a ‘clean break’ as their pension savings are fully separated.

Other options for divorcing couples include offsetting pensions so that the value of any pensions is offset against other assets, such as the marital home. The divorce settlement may be arranged so that one partner receives the marital home, for example, whilst the other keeps their pension rights. Pension offsetting can be difficult as valuing and splitting assets fairly is complicated, especially as their values are likely to change at different rates over time.

Pension earmarking is another option, and involves some or all of the pension benefits of one partner being earmarked so that they are paid to the other partner at retirement. Payments will stop if the partner receiving the earmarked pension retires.

Learn more about separating your finances in our article Sorting out your finances when a relationship ends. Bear in mind that dividing pensions when you’re divorcing can be complicated, so it’s important to seek professional legal advice on the best way to arrange this.

Has your retirement income been negatively affected by divorce? Did you use pension sharing to split pensions when you divorced? We’d be interested in hearing from you. You can join the money conversation on the Rest Less community or leave a comment below.

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