Statistics show an increasing number of over 65s are divorcing. This trend began in the 1990s and contrasts with the overall falling divorce rate.
The rise is partly attributable to longer life expectancies and looks set to continue as the number of people aged 60 and over in the UK is expected to exceed 20 million in the UK by 2031. A quarter of the population will be 65 by 2031.
Other reasons cited for this increase are the lack of stigma now attached to divorce and the increase in working women leading to greater financial independence.
Over 65s are often in good health and without the responsibilities of work and dependent children for the first time since reaching adulthood. Some may regard it as an opportune time to end an unsuccessful marriage without complications. Nevertheless, it is important to seek specialist advice about the financial implications of separating and the options available, particularly where property and pensions are involved.
In many over 65s separations, pensions will be the main source of income. With a long marriage, the starting point is an equal division of the assets and there are various options to address the difference in the size of pension pots:
The main one is by a Pension Sharing Order where the party with the least or no pension rights takes a proportion of the other party’s pension rights, which either remain within the same pension scheme or are transferred to an outside provider. This type of order is advantageous because it assists with a financial clean break and provides the recipient with an income for life.
The second option is an Attachment Order where the recipient receives a percentage of the other party’s pension lump sum and/or income. However, the pension member continues to own the pension and so the recipient’s income from the order will stop if the pension member dies. The income is taxed at the pension member’s highest rate before the percentage is applied and payment made to the recipient and the order is also capable of being varied so there is no clean break.
The third alternative is Offsetting where the recipient takes cash in lieu of a share of pension rights.
Due to the unique and complex nature of pensions, it is wise for a pension expert (Actuary) to be instructed to advise in more detail on the options and in particular in relation to a long marriage, on the level of Pension Sharing Order required to ensure that both parties have the same pension income on retirement from all rights accrued to date.
Before reaching any settlement, each party needs to provide the other with full details of their financial circumstances including the cash equivalent values of their pensions (the value attributed to them for divorce).
Any Pension Sharing Order will not take effect until 28 days after the date on which it is made and so it is important not to finalise the divorce until then as if the pension member dies, the recipient will lose their pension sharing order and any widows/widowers benefits payable under the scheme.
Ashfords can advise on whether pension sharing is appropriate and this will be dependent on the facts of each case. For the over 65s this will be an important factor in considering whether any settlement meets their future needs.
Jayne Turner is a Partner in the Family team. She is a trained and experienced collaborative lawyer and is also a Resolution Accredited Specialist in Complex Financial Remedies and Pensions on Divorce and is an Advanced Member of the Law Society’s Family Law Panel. Jayne is described in the Legal 500 2018 directory as “sensible, client focused and knowledgeable”.
For any more information please contact Jayne Turner on: CJ.Turner@ashfords.co.uk.