Majority of pensions not split in divorce

The majority of divorcing couples are not including pension savings in their financial settlement, with women more likely to be negatively affected in the long term, according to new research.

Ideally, a divorce settlement should fairly divide the couple's assets and enable both parties to move on with their lives. However, consumer group Which? is concerned that some couples are potentially ignoring one of the biggest assets in their marriage.

UK courts have allowed divorcing couples to share pensions since 2000, but a survey of almost 1,000 Which? members who have been through a divorce in the past 22 years showed that seven in 10 (71%) made no agreement on pension sharing.

Of these, almost one in five (18%) had not considered division of pensions during their divorce proceedings, and 22% did not want to share their pensions.

This problem will be exacerbated by "no-fault divorce" reforms, which could make it more difficult for some people to access legal advice in good time, Which? warned.

Currently, up to a third of divorcing couples fail to seek professional advice.

Leaving a large pension out of a divorce stands to disproportionately affect older women who are statistically more likely to have inadequate pension savings.

Lower earnings, sometimes due to part-time work, mean that women may make lower pension contributions. As many as 3 million women don't have a workplace pension as their pay is below the minimum earnings threshold for auto-enrolment.

Women also spend an average of 10 years on career breaks to start a family and look after children and other relatives, with the burden of care often not routinely split between partners.

As a result, women's pension savings can stagnate, potentially spelling disaster for a woman who divorces and does not get a share of her spouse's pension.

Instead of pension sharing, many divorcing couples choose to offset the value of the larger pension pot against an asset such as the family home. This can seem like a good deal because on paper, the property may be worth more than the pension and is an immediate financial benefit. However, the declared value of the retirement savings does not include the projected future value of the pension or other benefits, such as death benefits and discretionary benefits, which could prove more valuable in the long term.

The financial impact of missing out on a share of a significant pension could be "catastrophic" in later life, said Which? Money editor Jenny Ross.

"Wherever possible, we encourage people to seek legal and financial advice when embarking on divorce proceedings, in order to ensure they are equipped to make the best financial decisions for the future."