Divorce law shake-up fails to tackle long-term financial inequalities, experts warn

The largest overhaul of divorce legislation in 50 years is ready to herald a rush to separate, as so-called “no fault” laws comes into impact as we speak. However consultants warn the monetary destiny of divorced ladies stays perilous.

Designed to make the method easier and fewer traumatic for {couples} splitting up, the brand new guidelines take away the necessity for one or each events to have dedicated adultery, abandoned, behaved unreasonably in the direction of, or been separated for a number of years earlier than a divorce is granted.

However the guidelines do nothing to deal with the persistent unfairness when monetary property are break up, warns Emma Watkins, managing director for retirement and longstanding at Scottish Widows.

“We all know from historic proof, it’s doubtless that ladies are sometimes left short-changed,” she says. “Sometimes, ladies’s retirement prospects are already worse than males’s however add in a divorce and so they deteriorate even additional.”

Regardless of pension pots generally being the second largest, if not the biggest, asset a pair has, they typically go ignored throughout divorce, mistakenly seen as a private possession, reasonably than shared. In reality, our evaluation reveals that is costing ladies as much as £5bn a yr.

Evaluation of essentially the most up-to-date Household Legislation Courtroom statistics out there by wealth administration agency Quilter reveals there have been 116,612 petitions filed for dissolution of marriage in 2019, however solely 13 per cent contained some type of pension settlement order.

That is regardless of a latest pattern in individuals getting divorced later in life. In response to the Workplace for Nationwide Statistics, during the last twenty years the typical age for somebody to get divorced has risen by eight years for each women and men, to 46.4 for males and 43.9 for ladies.

And whereas the brand new guidelines lastly convey the divorce legal guidelines into the twenty first century, “it does open the door to extra {couples} doing their divorce themselves because the solicitors grow to be much less integral to the method”, says Jon Greer, head of retirement coverage at Quilter.

“This in flip might imply that {couples} when contemplating how they break up their cash neglect to incorporate their respective pensions.”

The low variety of pension settlements could also be as a result of a lack of awareness or information on this advanced space by divorce practitioners and their purchasers. It may be all the way down to extra individuals selecting to go down the pension offsetting route. For instance, one partner could need to keep within the marital dwelling in lieu of receiving a part of their ex-spouse’s pension rights.

In reality, single moms’ pension wealth has virtually halved over the previous two years to only £11,000 – 40 per cent lower than in 2020, analysis by pension supplier NOW: Pensions has discovered, with greater than half of single moms at present ineligible for a office pension to assist improve that quantity.

The pensions commerce affiliation, the PLSA, suggests people want an revenue of £20,200 a yr for a “average” life-style in older age, that means single moms face pension poverty.

Charlotte Carter, 31, a self-employed single mom, says: “As a single mom, it’s exhausting to plan for the long run, as planning for the following month or yr can typically be a problem. With the present dwelling prices on the rise, these boundaries are solely going to worsen, however we’re a resilient group and we’ll maintain combating for equality in society.

“I’ve by no means even thought of my long-term funds as my focus has all the time been zoned in on what actions I can take to enhance my rapid future. I’m relocating out of the town so as to safe rental lodging as a result of housing disaster. Single dad and mom’ funds are being squeezed, extra must be performed to help single dad and mom save for his or her future and elevating consciousness of this concern and the options that might resolve it’s one thing that I imagine might help make that change.”

“It’s actually troubling that almost all of single moms are being locked out of office pension financial savings, with single moms reaching retirement age with the bottom pension wealth on document,” provides Samantha Gould, head of campaigns at NOW: Pensions.

“The prices of childcare are unsustainable and as a single mom myself, there may be already a lot stress as each the only earner and carer in a family.  Single moms will probably be feeling the pinch with many pressured to cease working altogether to care for his or her youngsters. This perpetuates the present financial savings gaps skilled by some teams within the UK which should be addressed.

“With the vast majority of single moms now locked out of office pensions, we’re calling on the federal government to make coverage adjustments and take away the auto-enrolment set off of £10,000 and beginning contributions from the primary £1 of earnings,” she provides.

“This is able to convey an extra 200,000 single moms into office pensions and improve their monetary safety in retirement. We should be certain that everybody has an equal alternative to avoid wasting for his or her futures and construct an enough financial savings pot for later in life.”