"He can keep his pension, as long as I get the family home."
Family lawyers often face the challenge of addressing such feelings, as they stem from a deep emotional attachment to the family home. By contrast, pensions are not as straightforward, and their complexity often leaves many parties ignoring the asset entirely. However, neglecting pensions can have significant financial repercussions, especially for women.
Pensions, Divorce and Women: The Stark Statistics
Recent research reveals that while 50% of divorcing couples consider the value of their family home, only 13% take pensions into account. Consequently, only 15% of divorces result in the division of pensions, compared to 70% for the family home. Shockingly, 23% of couples actively waive their rights to the value of pensions altogether.
Despite 90% of couples having a pension pot between them, only around 15% have an equal pot on both sides. This disparity significantly impacts women over 50 who divorce, as their income on average drops by approximately 41%, compared to only 23% for men.
Head vs Heart. Pension vs Home.
The family home often holds deep emotional significance, representing stability and continuity. A study found that the emotional attachment to a home can be almost as strong as an attachment to a living being. This emotional bond can cloud financial judgement, leading to decisions that may not be in a client’s long-term best interest.
Given the housing market's volatility and the fact that property isn't a liquid asset, relying on a house for income in later life often isn't practical. For instance, a £3,000,000 pension fund is likely to be far more advantageous than a property valued at around the same amount because it provides an annual income, whereas the property might need to be sold to access funds during retirement.
Knowledge is Power – how a financial planner can help
Financial planners can provide practical information to help clients gain perspective on their emotional attachment to the family home, complementing the advice given by family lawyers. This support may include:
Demystifying Pensions
Provide a straightforward, simple and jargon free explanation of how pensions work generally, helping clients appreciate the importance of taking pensions more seriously.
Highlighting the Long-Term Benefits
Using simple visual tools, like cashflow modelling, demonstrate how a pension grows and provides an income versus a property of the same value, focusing on how a well-managed pension can provide financial security in retirement.
Empowering Them for the Future
Begin discussing some of the options and opportunities that may be available to them post-divorce if they make well-informed choices today, including what a new home could potentially entail.
Why partner with Quilter Cheviot?
At Quilter Cheviot, we recognise that the emotional aspects and financial aspects of asset division often go hand in glove, as demonstrated by the family home versus pension conundrum family lawyers often face with their clients.
Our financial planners and investment managers are here to provide reliable and compassionate guidance. We are dedicated to empowering our clients, helping them to move confidently towards their future, and ensuring their wealth and well-being thrives after divorce.
Should you want to know more information about pensions* or think your client would benefit from a jargon free discussion about pensions or any other aspects of their wealth planning, please do not hesitate to contact us.
* Please note our financial planners are unable to give pension splitting advice.
Author
Erin Florendine
Family Wealth Business Development ManagerWomen and investing
Exploring the key ingredients for successful investing and how we can help you on your investment journey.