Joint savings for retirement, despite divorce risk

by Legal Author on December 13, 2012

This guest post is courtesy of Scottish IFAs, Warde Graham, financial advisers in Glasgow, Scotland (www.wardegraham.co.uk/) who can help you with your retirement planning.

Nearly half (43%) of women are relying on joint savings with their partners to fund their retirement, despite the fact that one in three marriages in the UK now ends in divorce by the fifteenth anniversary.

The figures, from the eighth annual Scottish Widows Women and Pensions Report, reveal that less than one in five (17%) of women trust their own savings to see them through retirement, compared to nearly a third (30%) of men.

Discussing retirement plans

Despite many women being dependent on their partners for their income in old age, the report finds that couples rarely discuss the issues involved.

The vast majority (79%) of married women say that retirement was not discussed with their partner before they walked down the aisle, and 78% said they did not know what they would be entitled to from their partner’s pension if they divorced.

Pension discussions in divorce

Surprisingly, out of the divorced women surveyed, just 15% said pensions were discussed as part of their settlement. This is in spite of it being a legal requirement that pensions are taken into account in divorce settlements, through methods such as offsetting, earmarking and sharing.

This is especially significant, says the report, because women are more likely to work part-time or have caring responsibilities for family members, meaning that they are at greater risk than men of losing out on important retirement income.

The impact of divorce on retirement planning

The report highlights the impact of divorce on women’s retirement as very concerning given that almost one in ten (8%) of women over 50 are wholly dependent on their partner’s savings to fund them in retirement.

This group of older women are particularly vulnerable in terms of lack of retirement provision; with the number of women over 50 without a pension nearly double that of men of the same age (28% vs 15%). As the divorce rate in the UK continues to rise, this group of women could be exposed to hardship in retirement should they separate from their partners.

Drop in retirement saving

The problem is compounded by the fact that the gender gap in retirement savings has increased by over 10% in 12 months.

In terms of savings put aside for retirement, women are now saving an average of £776 per year less than men for use in old age – significantly higher than the £700 gender gap recorded in 2011. This means that a 30-year-old woman who maintains this average annual rate of saving will face a shortfall of £29,800 in today’s money, compared to her male counterpart, if she chooses to retire at 65.

“We know that the pressure on household budgets and the challenge of managing childcare and wider family responsibilities whilst balancing work, can all make it more difficult for women to save for retirement,” said Lynn Graves, Head of Business Development, Corporate Pensions at Scottish Widows.

“For many older or divorced women, this can mean relying on a partner or other family members to provide support or additional income in later life. However, unforeseen events can have a stark impact on retirement plans, and it is important for women to make sure they know what they are entitled to and how much they can expect to receive in retirement,” she added.

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