Divorce in later life: how women can attain financial security
A combination of lifetime savings, house price inflation and good pensions means the 50-plus age demographic often possesses a significant sum of assets.
However, with this generation also more likely to have followed traditional gender roles, women in their sixties entering into a divorce may find themselves in a vulnerable financial position, without the independent provisions to rehouse themselves and build a new life.
While the courts will take into account the circumstances of individual relationships when deciding how capital should be divided, seeking legal advice at the earliest possible opportunity is advisable. This can help ensure that mature women receive a settlement which leaves them financially secure following a separation by making sure that all assets are taken into account.
As women are generally lower earners than men, they are commonly in a less advantageous position to begin with. This trend is being exacerbated by an increasing move in the courts to sever financial ties between a husband and wife on divorce, meaning it is becoming more unusual for women to get large or long-term spousal maintenance agreements.
With regards to their pension and retirement in particular, women over sixty who had expected to remain with their husbands for the rest of their life but subsequently find themselves going through a divorce may experience a ‘double blow’. In addition to losing a share in their husband’s pension, many women may not have made independent provisions if they do not work or their spouse is the higher earner.
In order to reach a fair decision about how capital should be divided between a husband and wife on their divorce, the courts will consider whether either party has experienced a ‘relationship generated disadvantage’. For example, a woman who has taken time out of work to raise children may not have been able to progress her career as much as her husband, leaving her with less earnings and pension savings and a smaller mortgage capacity. Although their decision will depend on the assets available, the courts’ priority is ensuring that people can rehouse and they will attempt to adjust assets so that this is achievable.
If a husband remarries he is still obliged to continue maintenance payments if these have been determined by a Court Order, however, if a woman decides to remarry he no longer has to do this. To best protect themselves in the event that the former husband dies, women should attempt to come to the best agreement possible during divorce proceedings and may wish to consider asking the man to take out a ‘life policy’. This will effectively ‘plug the gap’, allowing the woman an income during retirement in the event that he dies.
During a divorce situation, women may be tempted to simply accept their husband’s first offer or take his valuation of assets for granted, however, this can often be woefully inadequate. This point is well illustrated by the landmark 2017 judgment in the case, Goyal vs Goyal. Amit Goyal, a former investment banker earning £365,000 a year was told to hand over two thirds of his pension income to his ex-wife Ankita after transferring funds to an Indian pension provider in a bid to hide the assets.
As well as serving as a deterrent to warring spouses who attempt to hide assets from the British courts, this ruling emphasises the importance of women taking steps to understand their financial situation and not simply leave it to their husband, even if nothing is currently wrong with their relationship. Furthermore, with the value of final salary pensions increasing by 15% in 2016, Goyal vs Goyal is a reminder that overlooking the value of an ex-husband’s pension could be a costly mistake.
Claims to a former spouse’s pension can be approached in two main ways. ‘Offsetting’ means that rather than claiming a share of the pension, the woman receives more from other assets and can be a good option if the husband’s pension is not worth much. ‘Pension sharing’, on the other hand, involves a percentage of the pension value being transferred into a separate pension for the woman to draw on independently.
It goes without saying that divorce in later life can be an emotional experience, and a woman’s first response may be to attempt to resolve financial disputes without involving a solicitor. However, while communication between the parties is important, seeking legal advice at the earliest possible opportunity can help women to ensure the final division of assets is fair and representative of the particular relationship, while avoiding the costs and stress involved in entering the courts.
Caroline Elliott is a partner and family law specialist at Shakespeare Martineau