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Cost of divorce: £3,800 per year in retirement

Cost of divorce: £3,800 per year in retirement

Category: Retirement
23/02/2018

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The break-up of a marriage can have many different effects – there's the division of property, solicitor fees and a lot of careful navigation where kids are involved. What people don't often think about, however, is the effect it could have on one's retirement income. Divorcees planning to retire in 2018 are expected to have a yearly income that is £3,800 less than those who've never divorced.

This is according to research from Prudential, which looks at the 'Class of 2018' retirees. They found that those who have previously been divorced can expect an annual retirement income of £17,600, whereas those who've never been divorced can expect a higher income of £21,400 if they retire this year.

And that's not the only bad news for divorcees. The figures show that they are more likely to retire in debt (with 23% doing so compared to 16% of people who've never been divorced), and to have no pension savings when they retire (15% versus 11%). One bright spot is that divorcees do tend to retire with less debt, at £30,500 compared to £36,900 on average.

"Divorce can have a huge financial impact on people's lives," Clare Moffat, pensions specialist at Prudential, said. "The stress of getting through a divorce can mean people understandably focus on the immediate priorities like living arrangements and childcare, but a pension fund and income in retirement should also be a priority.

"A pension fund is one of the most complex assets a couple will have to split, so anyone going through a divorce should seek legal and financial advice to help them do so … It goes without saying that advice is crucial as early as possible in any separation where couples have joint assets."

Now, nobody wants to go into marriage prepared for divorce, but that doesn't mean you should rely solely on joint pension arrangements. If your current retirement plan relies hugely on releasing the equity from a shared home, for instance, you are risking not just losing your source of equity in a divorce, but also decreased funds if house prices were to drop.

That's not to say that equity release can't provide welcome additional funds in retirement. Just don't put all your eggs in a single basket. A workplace pension, private pension, lifetime ISA and equity release can all work together to help you gain the retirement income you desire.

What next?

If you're not yet retired, why not share with us what kind of expectations you have for retirement? Click here to take our latest one-minute survey.

If you're nearing retirement, consider an annuity to get a guaranteed income for the rest of your life.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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