Home divorces can have ‘disastrous consequences’ for women who will be worse off in retirement

A rapid rise in the number of “DIY” divorces is putting people at risk of having their pensions divided unfairly and worse off financially after they retire, experts have warned.

Since 2018, it is possible for separating couples to file their own legal papers for divorce without having to use a lawyer to oversee the process.

Do-it-yourself divorces are usually quick, usually taking only a few months to settle, as long as both parties agree to the financial settlement, and they’re cheap, since they don’t require lawyers to pull them off.

Although the mechanism was thought to be better for relationships with direct finance that could be easily divided, there has been a corresponding drop in “pension split orders” that aim to divide pension assets fairly between both parties.

According to figures from the Ministry of Justice, applications for joint support orders fell 35% in the four years to 2021, to some 23,600, despite a 1.6% increase in divorces between 2017 and 2020.

Retirees and legal experts have warned that the trend is particularly worrying for women, for whom a quick divorce could have “disastrous consequences” on their retirement.

According to research conducted by the University of Manchester Institute for Collaborative Research on Agingsupported by the Pension Policy Institute, Divorced men between the ages of 55 and 64 have on average five times more pension savings than divorced women of the same age.

Non-cohabiting divorced men in this age group had average pension savings of around £100,000, compared to just £19,000 for divorced women of the same age.

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Through pension distribution orders, the spouse with a lower value of pension savings receives a proportion of their former partner’s pension funds.

Steve Webb, a partner at Lane Clark and Peacock, urged those choosing the DIY route to exercise caution. “It can be very tempting to cut corners to complete a divorce, but neglecting pensions can have disastrous long-term consequences, especially for women,” he said.

More of Pensions and Retirements

“The time and money spent getting expert advice at the time of divorce, especially if one party has substantial pension rights, can mean the difference between a comfortable retirement and one struggling to make ends meet.”

Statistics show that women who have been divorced at retirement age have lower than average pension capital than women who have not been divorced.

This means that there is a risk that some divorced women will retire worse off, unless they have carefully considered their pension.

Another way to manage the retirement funds of divorced couples is through “pension compensation”, in which one of the spouses can be assigned an asset of similar value to that of the pension, such as the family home.

Matthew Taylor, partner at Stowe Family Law, said to financial times that although this route might be “the best thing for some families”, there were also potential problems.

“The initial figure for the value of a pension at the time of divorce may not reflect the true value of that retirement income, particularly for public sector schemes, which pay inflation-proof income for life,” he explained. “A pension of £100,000 is usually much more valuable than £100,000 worth of a house.”

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Moneyhelper, the government’s free debt counseling and advice service, advises those planning a do-it-yourself divorce to have any proposed division of assets checked by a professional, to ensure that the division is fair, particularly with respect to pension assets.

“Negotiating your own financial settlement with or without professional support may seem like the cheapest and easiest way to settle,” a spokesperson for the service said. “But it can be complex and there are many things that you and your husband, wife or partner will need to consider.

“It might be helpful to have at least a safety check meeting with a family law attorney. This will help you understand your rights and the full implications of any agreements and decisions you make. It will also ensure that any agreement is legally binding.”

The Ministry of Justice was contacted for comment but had not responded at the time of publication.

What is a DIY divorce?

Anyone can opt for a DIY divorce or dissolution, but it generally suits the following circumstances for couples in England and Wales, says Moneyhelper:

  • Your ex-partner agrees to the divorce or dissolution, or you have been separated for five years or more;
  • You have been married or in a civil union for a relatively short time;
  • You do not have children or cannot arrange children’s arrangements;
  • You have both lived in the same part of the UK for at least a year;
  • You can discuss or negotiate how you will divide what you own and what you owe.

It may not be the best option if you or your ex have:

  • Children under 18 years of age;
  • A valuable house;
  • A business;
  • Pension(s);
  • Complicated finances.
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Couples can find the forms online at GOV.UK website in England or Wales or the Northern Ireland Courts and Tribunals Service website. Those in Scotland can find more information on the Scottish Courts website.

Some companies also offer DIY divorce services online, at different prices and service levels. Often, they will only help with paperwork, rather than help the separating couple come to a financial settlement.

Most high street attorneys will also offer a flat fee for a divorce or dissolution.