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Divorce rates could cause pensions crisis

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With this Monday anticipated to be the busiest day of the year for couples intent on ending their marriage, Killik & Co anticipates an increase in client enquiries relating to divorce.

Figures supplied by the Ministry of Justice, show an increase of up to 50% in the number of divorce petitions filed in the first quarter of every year. This trend looks set to continue in 2008 reflecting an increase in divorces coinciding with the post-Christmas blues.

In addition, new rules to make pensions fairer when couples break up are not being exploited by women, despite much publicity surrounding their introduction 6 years ago, following the Welfare Reform and Pensions Act in 1999. According to Killik & Co, this failure to adopt the new pensions-splitting rules, so each partner gets a fair share, is creating a pensions underclass amongst women.

Since the rules were introduced – in December 2000 – there have been over 1 million petitions for divorce, yet figures from the Department of Constitutional affairs reveals that between October 2006 and September 2007 only 7.89% of divorcing couples obtained pension sharing orders.

This is a slight rise from between December 2000 and December 2006 when 6% of cases had some kind of pension sharing or pension attachment orders. The trend is on the rise, but there is still a long way to go.

Malcolm Cuthbert, managing director of the financial planning division at Killik & Co, said: “We receive many more client enquiries relating to divorce in the New Year – possibly because of the stressful Christmas and New Year period. With such a dramatic increase in divorce petitions in the New Year period, pensions are a major cause for concern, specifically for women.

“While in some divorces pensions count for little – such as when the couple are young – pensions are normally the biggest asset in a divorce settlement after the matrimonial home and lawyers should be advising their clients accordingly. Women often struggle to gain pensions that provide enough income to survive, let alone enjoy, old age in the first place.”



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