BLOG: The real cost of divorce

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16/01/2014
Divorce is a difficult experience for any couple, but increasingly money and financial arrangements become entwined in difficult and hostile situations.

Sadly the month of January is the busiest time of year for divorce lawyers who are typically contacted following the Christmas period.

The reasons why couples separate vary widely but often many look to start their new year with a fresh outlook and see January as the opportune moment to start legal proceedings.

Over 40% of first marriages end in divorce according to the Office for National Statistics but what has been especially notable in recent months is the rise of over-60s who are getting divorced. While reasons such as empty nest syndrome have been suggested to explain the rise, it is important to consider that it is common in a formal separation for a female partner to find themselves in the more difficult position financially. This is most apparent in retirement where women are more likely to lose out on their pensions.

Divorce proceedings, in their simplest terms, often come down to the distribution of wealth and while women are increasingly becoming more financially independent it remains important that the assets of any marriage are divided fair and equally.

Often the main pension holder and breadwinner is the husband and the wife is awarded a one-off lump sum or matrimonial home rather than a regular income to prepare them for retirement. As this is a relatively simple division, many are tempted to accept it but it remains vital that both parties seek impartial specialist advice, as while the matrimonial home may seem like the most attractive asset, it is rarely the case and provides relatively little long term security for the future. Though the lump sum might seem the best option at the time, both parties need to consider financial planning for the future rather than the present.

An important consideration for retired couples who go through a marriage break up is to address any imbalance in their pension provision. As women statistically shoulder a larger share of family responsibilities during a relationship they are most likely to have reduced their working hours or have sacrificed their professional careers in some way.

With a reduced income, it is not uncommon for one partner to be drawing from a much smaller pension pot than the other. As there is no legal requirement for a pension to be split, irrespective of the circumstances, addressing this at the outset is advised.

Inevitably divorce is an incredibly emotional and often upsetting experience, but financial wrangles shouldn’t mean that arguments, accusations and stress continue for months or even years on end. With the right financial plans in place and an efficient method of forward planning, the arduous process need not cost so much financially as it does emotionally.

Graham Kilkelly is a financial planner at English Mutual

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