With the rise of the online and ‘quick’ divorce, more and more people are separating assets without seeking financial advice.
With only 10% of divorce petitions in 2018 resulting in a pension sharing order, it's possible some divorcing couples are choosing alternative arrangements over and above splitting their retirement provisions fairly. In most cases, people perceive the family home as being more valuable than a pension fund, whereas, in reality, this could be wholly incorrect and in fact the opposite.
Staying in the family home may be the best option in the short term, especially if you have young children, however, once they're older and have flown the nest what will divorcees live on? A home doesn’t generate an income and whilst you can of course downsize in the future, as house prices and inflation increase, there is a big question mark as to how much equity will actually be released and if this would be enough to support retirement.
In addition, recent reports (Office of National Statistics) show that people are getting divorced later in life; the average age increasing by 10 years since 1987. This particular demographic, therefore, has less time to build retirement provisions of their own. Hence, dividing retirement assets could be key to avoiding ‘pension poverty’. Further data shows that 45% of women aged 65 or over have no private pension wealth. This is a staggering figure and will hopefully reduce as younger women’s awareness around retirement planning improves.
In summary, whilst a ‘do it yourself’ divorce might seem like the least stressful and cost-effective option, many could be missing out on valuable financial provisions for their future. It is always the best course of action to engage with a financial planner in the early stages of divorce who will help map out your future finances and the effect any decisions will have on your long term security.