New financial analysis has laid bare the stark retirement inequality facing divorced individuals across the UK, revealing a heavy reliance on the state pension that far outstrips their married counterparts.
The Pension Gap: Divorcees vs. Married Retirees
According to data from Interactive Investor, a profound gap exists in retirement funding sources. Nearly 70 per cent of divorcees rely on the state pension as their main income after leaving work. This compares to just 45 per cent of married people.
Meanwhile, access to private pensions is significantly lower for those who have been through a separation. Only 21 per cent of divorcees count a workplace pension as their primary retirement fund, with fewer than four per cent relying on a personal pension or SIPP.
The financial drag of divorce extends beyond pensions. Only 13 per cent of divorcees received an inheritance gift in the last three years, compared to 23 per cent of married individuals. Furthermore, just a quarter of divorcees are expected to have saved over £100,000 in pension wealth, versus 52 per cent of married people.
Why Pensions Suffer in a Divorce Settlement
Pensions are considered a joint marital asset and are typically subject to division during financial proceedings. However, the process is not always applied effectively. The Pension Policy Institute reports that only 11 per cent of UK divorces in the past two years included a pension attachment order, leaving many without a fair share of crucial retirement savings.
Craig Rickman, a personal finance and pensions expert at Interactive Investor, explained the long-term impact. “Getting divorced can cast a long financial shadow, even into later life,” he said. “The unfortunate reality is that many individuals don’t get a fair outcome during divorce negotiations. It’s a perfect storm because they are often under immense emotional and financial strain.”
Widows and the Challenge of Building Pension Wealth
The analysis also highlighted the precarious position of widows, with a staggering 71 per cent mainly dependent on the state pension. Female widows are particularly at risk due to historically lower private pension wealth, often a result of career breaks for caregiving and lower lifetime earnings.
Rickman urged anyone navigating a divorce to take proactive steps with their finances. “You may feel like you’re starting from scratch,” he noted. “Making small and regular steps can be easier than a dramatic overhaul and the long-term impact can be just as effective.”
He recommended key actions to rebuild wealth:
- Creating a detailed budget to understand new circumstances.
- Increasing savings rates where possible.
- Investing regularly to outpace inflation and grow money faster than property prices.
- Reviewing all assets, including savings, investments, and pensions, to ensure they are working efficiently.
Ultimately, keeping on top of financial affairs is vital to ensuring a retirement pot is sufficient, moving beyond leaving money idle in current accounts towards active, long-term wealth building.
