It is widely recognised that divorce can have a negative impact on a couple’s finances, but people are possibly less aware of how far reaching this impact can actually be.
According to a recent study by Prudential, the financial consequences of divorce are still being felt by many ex-couples when they enter retirement, to the extent that that the annual expected retirement income for divorcees is as much as £2,100 less than for people who are still married.
The study found that retirees who have never been through a marriage break-up can expect an average retirement income of £17,800 per annum. However, for retirees who have previously gone through a divorce, this expected income falls to £15,700.
A previous divorce can also affect the date that people choose to retire at. Prudential found that people approaching retirement who have been divorced (13%) are more likely to delay the date of their retirement compared with those who have never been divorced (11%).
In addition, one in five (19%) of retirees who have been divorced expect to live in retirement with an income below the Joseph Rowntree Foundation minimum income standard for a single pensioner of £9,500 – compared with 14% for those who have never divorced.
“Although the emotional impact of divorce may have long passed, it could come as a shock for people to find that it continues to impact them financially into their retirement,” commented Clare Moffat, pensions specialist at Prudential. “A pension fund is likely to be one of the largest and most complicated assets a couple will have to split in the event of a divorce.”
“During a divorce the costs can quickly mount up, with legal fees, the cost of setting up a new home and the effect of splitting any existing retirement savings all potentially impacting the ability of those involved to continue saving into a pension,” she added. “Unfortunately divorce is most likely among those aged 40-44, the period in many people’s lives when earning potential peaks and the most valuable pension contributions can be made.”
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