As recent research reveals that the average pension pot needed for a basic retirement has risen by almost 60 per cent in the past three years, many middle-aged people are becoming increasingly fearful that they will never retire.
The study from the Resolution Foundation and the Living Wage Foundation found that the ever-increasing costs of basic necessities such as housing, food and energy have caused a significant increase in the cost of securing an adequate income in later life.
These retirement-related concerns are particularly acute for women, with the same research revealing that the women surveyed had “more negative feelings“ than others about retirement savings and the future.
Much has been written about the gender pension gap over recent years, with recent figures indicating a 56 per cent difference in average pension assets held by men and women at retirement age.
As with the gender pay gap, lower wages, extra caring responsibilities, and higher rates of part-time work can lead to employment gaps, not meeting the auto-enrolment pension threshold and less money going into the pot.
Divorce exacerbates this issue for women. In part due to the reasons above, and a common situation whereby saving into their husband’s pension is done by way of the ‘family pension’.
A University of Manchester study in 2021, which looked at pension provision for divorcees aged 55-64, found that men had an average private pension fund value of £100,000, while women had accrued just £19,000.
Theoretically, divorce should narrow, not widen, the gender pension gap. Pensions are assets that the court can divide upon divorce and are often second only to the family home in terms of asset value. But many people choose to ignore them in their financial settlement calculations.
Pensions not the priority
So why are people continuing to avoid pensions as part of their divorce – particularly women who may face a retirement living in poverty without the extra income?
For many women, pensions are not prioritised on divorce. Often the primary carer or homemaker, their focus can understandably be to keep the family home, or have the financial ability to rehouse themselves and their children to a reasonable standard.
Women earning less, or working reduced hours to care for children, have a reduced mortgage capacity, so require more capital to finance or purchase a property. This tends to lead to women prioritising keeping the family home or taking more capital from the sale, frequently at the expense of a pension share.
Pensions can also appear complicated. I regularly advise clients unaware of the value of their own, let alone their ex-spouse’s, pension and therefore they do not consider it an important part of their divorce.
In a survey conducted by us at Stowe Family Law, 25 per cent of women did not know whether their spouse had a private pension, and 77 per cent of those who knew did not know its value.
