Divorcing later in life – why it’s important to get the finances right
New analysis by the Institute of Fiscal Studies suggests that people are now able to maintain their standard of living on retirement. But what does this mean for those retired people who wish to separate from their partner?
According to the IFS “92% of couples born in the 1940s have accumulated more wealth than .…they need to maintain their standards of living into and through retirement. The surpluses are substantial on average – the median surplus being over £220,000, which would be enough to produce around £7,000 a year of income if used to buy an index-linked annuity. Even excluding housing wealth, 75% of couples have more wealth than the model suggests they need to maintain their standards of living. The median surplus is over £120,000.”
While first time buyers now struggle to raise the substantial deposits required to buy their own home, many older people have benefited from buying property when prices were much lower and mortgages were much more manageable. Many people in or approaching retirement now have substantial equity in their properties as a result of the increase in house prices and have in many cases benefitted from generous final salary pension schemes.
The number of people separating after retirement is on the up. Relate reported in March 2014 that, while divorce rates for the general population are falling, the number of men aged 60+ who are divorcing has increased by 73%and similar trends are reported in women in the same age group.
So what does all this mean for couples who separate just before or during their retirement? The IFS data suggests that these people are also likely to have more complex financial issues to be resolved on divorce, sometimes after a lifetime of financial co-dependence.
If you are retired, or close to retirement, and considering separating from your partner, in addition to the usual issues to be resolved on divorce uch as where you will each live and how you will pay for your overheads, there are a number of issues you will need to think about, such as:
- Pensions– for many couples, the pensions accumulated during working life are the most valuable assets of the marriage aside from (or even including) the family home. The sharing of pensions is a complex area requiring expert input on valuation to ensure that any sharing maximizes the available capital and income. This is true whether pensions are already in payment or not.
- Jane Wilkinson specialist in financial cases says “Where couples can get things wrong is with pensions. Often pension assets are held unequally as a result of time out of the job market with children and a pension fund (whether in payment or not) is a matrimonial asset for sharing. If this is glossed over and figures worked out on the back of an envelope one of a couple can have a much tougher old age than was necessary and the lawyers involved could be negligent. It is essential to get pension sharing options properly worked through with expert pensions advice”.
- Retirement income from investments – as well as pensions, there may be other investments such as buy to let properties, share portfolios or savings to be considered.
- Tax– it is sensible to obtain advice about how inheritance tax and other taxes apply in each individual case, in order that appropriate tax planning can be taken into account when deciding on how and when assets should be shared on divorce.
Let us help you
Here at David Gray Solicitors our Family team will help you through the difficult decisions and process involved in separation and divorce. We have Resolution accredited specialists in complex financial provision and pensions on divorce who work closely with our Property team to advise about the transfer of property, tax and estate planning to ensure that your assets are protected. We will advise you about the options to resolve any disputes around financial matters on divorce, such as through solicitors, collaborative law or mediation.
To speak to the right person for your situation contact Louise Law by email or phone (0191 243 8163) or Chat Live on our website