Business

Pensions should not be an afterthought for divorcees

A Canadian man recently saved himself £850 by registering with his insurance company as a woman in the province of Alberta

A CANADIAN man recently saved himself a packet on his car insurance with a neat trick.

He told his doctor he wanted to live as the opposite gender, and his GP duly wrote to his insurance company saying that ‘he' was now a ‘she'.

His insurance premium for the Chevrolet Cruze he was buying immediately fell by $1,100 (£850). He is now registered as a 23 year-old woman in the province of Alberta, and says he spends most of his time telling his friends he has no desire to switch gender, and only did it for the insurance.

Well, being female may be a financial advantage in Canada, but it's not so simple over here - particularly with regard to our pensions.

In this column we have discussed many times the ‘motherhood penalty', the years of pension contributions that women miss out on, if they take a career break to raise their young family. This disadvantage can be compounded if their eventual return to work is only to a part-time job.

But today we want to look at a very particular group of women who seem to face a particular set of problems when working towards their retirement: divorcees.

You are probably happily married. If so, I'm glad to hear it. However, our equally happy friends at Scottish Widows, between telling us we're all going to die and probably have a stroke before that, are now drawing our attention to how many broken marriages there are out there.

It's like everything else. It may never happen, but it's good to be prepared.

The fact is that a quarter (24 per cent) of women who get divorced have no pension. Perhaps they felt their partner would provide.

And nearly three quarters (71 per cent) of couples who split don't think of their old age during the divorce settlement – the subject of pensions doesn't even come up.

While over half of married people (56 per cent) would fight for a fair share of any jointly owned property, and 36 per cent would want to split their combined savings, fewer than one in 10 (9 per cent) claim they want a fair share of pensions to sustain them in later life.

And more people are more concerned about losing a pet, than losing a pension! (13 per cent versus 9 per cent)

This is despite the fact that the average married couple's pension savings are £132,000, more than five times the average UK salary of £26,000, and, as Scottish Widows helpfully points out, just over the average price of a house in Bradford.

Part of the reason why the subject of pensions falls by the wayside in divorce proceedings is lack of information and knowledge. Almost half of women (48 per cent) have no idea what happens to pensions when a couple gets divorced.

The fact is that fairness often prevails.

It's called ‘offsetting'. For instance, one person can keep their pension, but the other gets more of the other assets. Another solution might be the court issuing a pension sharing order, giving a percentage of one person's pension to the other (which could be 50:50 but often won't be) or a combination of the two may be needed.

I should add, though, that pension sharing orders are made in just 11 per cent of divorces.

As I say, you may have a long and blissful marriage, but it does no harm to have some provision for yourself in case you do not.

In actual divorce cases surveyed by Scottish Widows, 16 per cent lost access to any pension savings when they split with their partner, and 10 per cent were left relying completely on the State Pension.

Would it be worth considering starting a personal pension for yourself? Any trapeze artist will tell you they wouldn't be up there if they thought they were going to fall, but they'd like the safety net anyway, thank you very much.

Oh and incidentally, you don't have to be like our Canadian friend to be in a divorce. Takes two to tango, and much of the above also applies to men.

::Michael Kennedy is an independent financial adviser and pensions specialist, and can be contacted on 028 71886005 . Further information is available on the Facebook page 'Kennedy Independent Financial Advice Ltd' or the website www.mkennedyfinancial.com

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