What the new divorce law means for the pension savings gaps
New divorce laws came into force on 6th April in England and Wales. These laws saw the recognition of so-called “no-fault” divorces, in what is hoped to be the biggest shake-up of divorce laws in over 50 years.
This overdue improvement of family law in England and Wales will enable couples to split without having to say one person was in the wrong. However, with these changes, there is a greater risk of financial inequality when it comes to women’s pensions and later life finances.
Pension inequality is already polarised
Pension pots are typically the second-largest asset, after property, in marriage but women are often walking away from divorces short-changed. At NOW: Pensions our research shows that only two in ten divorces have a pension sharing order which means that women are reaching retirement age with just 12% of the pension wealth of men. The gender pension gap is causing women to reach retirement age with an average pension pot of just £26,100 compared to a man’s pension wealth of £205,800. That is a difference of £179,700.
What about other assets?
First of all, divorced women suffer from low levels of homeownership – just 49% own homes compared to the UK average of 65%. We know that people who rent face higher housing costs and more financial instability compared to homeowners.
Then we’ve got income challenges: 34% of divorced women work part-time, and many of those jobs are in low-paying occupations. Combine this with the cost of childcare and we begin to get better understanding of the reasons behind gendered divorcee pension inequality and the growing pension gap.
What can women do to demand fairer late life equality?
As someone who’s been through the divorce process, I know all too well that it is an extremely stressful time, and it can be difficult to think long-term beyond the day-to-day financial pulls. Yet it is so important to consider your long-term financial needs and how you can achieve a fairer outcome by seeking pension advice.
It’s time that we demand an equal playing field and push for some serious policy changes to address the inequalities in both pay and pensions.
