Pension sharing and gender gap
Pension sharing orders are a potential option for divorcing couples with pension funds when considering a financial settlement. The effect is to transfer part or all of a pension fund in one spouse’s name in to the name of the other. This is appropriate in marriages where one party has built up a bigger pension fund than the other, or the only pension, and the balance needs redressing.
I would always recommend seeking the advice of a pension expert in such scenarios to ensure any division is dealt with fairly and cost effectively. It may be that an equal share is not appropriate because of pre-marital contributions or because one party is keeping more of the other assets such as property or capital. Sometimes, one spouse may keep all their pension fund in lieu of the other party keeping more of the liquid assets.
Conventionally it has been the husband who has built up the larger pension fund and therefore the wife who is likely to seek a pension sharing order. However, it is also often the wife that may retain more of the other assets such as property so would still leave the marriage with no or little pension provision. A recent report published by NEST (National Employment Savings Trust) found that only 14% of divorce settlements include pension sharing orders. The report can be found here.
The report further found that the average working full-time woman in the UK could have a £41,000 gender pension gap at retirement, widening to as much as £72,500 for part time workers. The findings that women are less likely to plan for retirement indicates they will be more vulnerable to financial hardship as they approach their retirement years. Less women seek professional financial advice and systemic issues arise from the extra challenges women face when investing for retirement. Women are more likely to be in lower paid and part-time jobs and they also, on average, live longer than men so need their pension to last longer. The same NEST report also makes suggestions as to how to bridge the gap.
The family team at BPE often signpost clients in the direction of a financial planner or pension advisor at an appropriate time so these issues can be considered further by specialist professionals.
If you have any questions or concerns about financial settlements or family law matters, please contact Jemma Jones or another member of the Family Team at BPE.
These notes have been prepared for the purpose of an article only. They should not be regarded as a substitute for taking legal advice.