Women’s financial futures are potentially being put at risk following divorce, according to new research by Legal & General.
Women are likely to see their annual household income take a serious financial hit in the first year following their divorce, falling by an estimated 41 per cent, compared to 21 per cent for men. One in four women report struggling financially as a result (24 per cent), compared to 18 per cent of their male counterparts.
In addition to these immediate changes to income, there is a long-term impact to women’s financial wellbeing. While men and women tend to agree that the division of their finances at the point of divorce is fair and equitable (53 per cent of men and of 46 per cent of women), L&G’s research has found that many women may be signing over their rights to a pension as a key financial asset.
Almost half of divorcing couples (49 per cent) consider the value of their joint home when dividing assets, but only 12 per cent think about their pensions. Women are also significantly more likely to waive their rights to a partner’s pension as part of a separation (30 per cent of women vs. 17 per cent of men).
This can exacerbate the already significant gender pensions gap and potentially could leave divorcing women without the resources to fund their retirement. Women had saved an average of £23,000 in their pension at the point of divorce, compared with the £60,000 saved by their male spouses, demonstrating a significant disparity in potential retirement outcomes.
Despite this, only 7 per cent of those going through a divorce seek independent financial advice, suggesting the advice gap facing many in the UK creates particular challenges for those going through a breakup. After the experience, many women suggest they regretted their decision to not seek professional guidance, with 31 per cent saying they’d be more likely to turn to an adviser in future.
Legal & General head of defined contribution Rita Butler-Jones: “Disentangling finances when a marriage ends can be painful for all concerned. But just as we’ve seen with gender gaps in pay and pensions, there may be particular jeopardy if you’re a woman.
“We know from our research into the gender pensions gap that women’s pension pots are generally half that of men’s at retirement. There are a number of reasons for this – from the gender pay gap to career breaks to taking on caring responsibilities for loved ones, women face a number of structural barriers when it comes to long-term, financial well-being.
“These findings tell us that divorce is a further key fault line in exacerbating the gender pensions gap. We would encourage anyone who is going through a divorce to consider the joint value of pensions as an important financial asset in any equitable split.”
L&G’s latest research continues to build on the company’s work to better understand pensions inequalities, including recent studies to analyse the ethnicity pensions and gender pensions gap.