Recent data from insurance giant Aviva shows that one in six divorcing couples were unaware that splitting up could affect their ability to draw a suitable pension in retirement.
Of the 1,000 divorcees polled, less than 10 per cent even had any pension savings of their own. This means that they are still financially reliant on their former partner for their income in older age.
One in three of those divorced people said that they had not made a single claim on their ex-partner's pension pot, with one in five doing so even if that made them poorer in retirement.
With roughly 100,000 divorces taking place in the UK each year, this means that there are tens of thousands of people missing out on essential funds for their retirement - some by choice.
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Aviva stated that couples who are getting divorced should be more aware of the financial issues it can trigger for pensions. On average, men get divorced at 47 years old and women get divorced at 44, meaning pensions should be taken into account.
The Office for National Statistics has data which reveals that private pensions account for £6.4 trillion of the £15.2 trillion in household wealth - 42 per cent. Divorcees revealed that they use existing savings, credit cards, and even borrow from friends and family to to supplement their income after divorce.
Alistair McQueen, head of savings and retirement at Aviva said: "The breakdown of a marriage is often referred to as one of the most traumatic and stressful events anyone can go through.
"Divorce can also be a costly experience, often including legal fees, a new home, a new car and new childcare costs. So, it's perhaps predictable that so many need to rely on savings or credit cards for support during this time.
"It's critical that, as part of the separation process, couples take time to think about and discuss one of their single most valuable assets, their pension. It's common that one party will have significant pension provision, and the other party may have little or none. Clearly, this could be a relevant factor in any divorce."
He added: "As well as hiring a family lawyer, it would be advisable for couples to contact a financial adviser to walk them through the pension valuation and financial process. You mustn't underestimate the value of pensions at this time.”
But divorce isn’t the only factor that can affect your finances later in life. Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, explains: “Pensions are a long-term game and it’s worth taking the time earlier in your career to think about what kind of retirement you would like and put a plan in place to help you achieve it.
“Circumstances can change quickly - we’ve seen many older workers leave the workplace early because of the pandemic and many have not returned.
"Having a retirement plan already in place can take the fear factor out of the future and mean you have the choice to take on part-time work for instance, rather than relying on a full-time job.”
Five ways to start planning for retirement
1. Check your state pension
The full State Pension is currently worth £168.15 a week. This is what many use as the primary source of their retirement income. You are required to have 10 years worth of National Insurance credits to qualify for a State Pension.
Those who don’t work can get credit by by claiming for Universal Credit or Child Benefit. You can check how much state pension you are on track to get on the GOV.UK website here.
2. Start a pension and keep contributing
Anyone over the age of 22 will be automatically enrolled onto a workplace pension. But keeping up your own contributions is important - stopping at any point can cause you to forget once you are financially able to again.
3. Boost contributions whenever you can
Auto-enrolment minimum contributions currently sit at eight per cent, but Aviva advises increasing the contribution you make to your pension each time you receive a new pay rise.
4. Use a pension calculator
Pension calculators help you see what increasing contributions will look like in real time. Pension providers generally provide pension calculators to help you plan your pension with ease.
5. Check you are on track for the kind of retirement you want
Which kind of pension is best will vary from person to person. Choosing the right pension for you will inform how much you need to contribute, and enable you to regularly check your progress.
