Divorce among people aged 60 and over in England and Wales has steadily been on the rise since the 1990s*. According to the Office for National Statistics, in 2011 nearly 9,500 men aged 60 and over divorced - an increase of almost three-quarters on the figures for 20 years earlier. The trend for women follows a similar pattern.
Many couples decide to go their separate ways in their later years and to begin a new life. But divorce rarely comes without complications, and many of these can be financial. Divorcing or dissolving a civil partnership comes with financial planning complexities, particularly when it comes to dividing pension incomes. It also creates a new need to restructure your finances for the future, and sometimes to re-invest your share of the wealth in order to secure a reliable income independently for the rest of your life.
If you are considering getting divorced or dissolving your civil partnership, take advice from a solicitor and a financial adviser to make sure pensions and other financial assets are valued and divided correctly.
Here are six ways in which your financial adviser can help:
1. In many relationships there is disparity in the amount of pension contributions paid and income received between partners. How pension income is split when you are in retirement depends on many factors. If you used the new pension freedoms and invested pension savings to provide an income, then money can be divided and re-invested without constraint in many cases. If an annuity was bought then it is more complicated. In these situations a couple may choose to settle their financial arrangements fairly using other assets, such as one person taking a greater share of a property in return for not taking a cut of a pension income. It becomes complex if there are beneficiary arrangements on death set up with the annuity, and a financial adviser can direct you to the rules and arrangement for your individual scheme. It may not be possible to change beneficiary arrangements.
2. If you receive a lump sum in lieu of a pension income, you may want to take advice about investing it in order to provide you with a retirement income. Alternatively if you would be more comfortable with a secure income for life or if you have health problems, your financial adviser may discuss options such as an annuity, which will provide you with an income for life with no investment risk in exchange for your lump sum (poor health can mean that the company is willing to offer you an ‘enhanced’ level of income which can be financially worthwhile).
3. Although it’s possible to divide your Additional State Pension (SERPS and/or the State Second Pension) when you get divorced or dissolve your civil partnership, it is not possible to divide the basic State Pension. However, you may be able to claim a basic State Pension using your ex-partner’s National Insurance contributions record. You lose your entitlement to this pension if you remarry or enter into a new civil partnership before you reach State Pension age.
4. If you have a shortfall in your State Pension, it may be possible to pay voluntary National Insurance contributions. You can find out more about how to pay voluntary National Insurance on the GOV.UK website, but it may also be worth seeking advice to ensure this will be of benefit in your particular circumstances.
5. Many people see divorce or separation as the chance to start life again. Wealth planning is about enabling wealth to provide you with security but also the freedom to live a life which you want to enjoy. This means re-considering what your own attitude is to taking investment risk, deciding how much income you need to live on and shaping your other policies to provide more funds when you need them, such as for a significant holiday trip. A financial adviser will work with you to ensure your financial arrangements are in line with your goals.
6. When a marriage ends there is often a fear of who will look after you in the final stages of life. Working with your solicitor, your financial adviser can talk to you about setting up a Lasting Power of Attorney and, depending on your age and wishes, can advise you on the options of funding assisted living or long term care either for now, or in the future if you wish.
In all situations of divorce, it is important that you seek legal advice to ensure an estate is divided fairly. You can appoint a financial adviser to help you with restructuring your finances at any time to help you with both short and long term wealth management needs.
If you’d like to find out more about this or know someone in this situation, please say hello, we’d love to help.