Today marks ‘Divorce Day’ which has long held its grim nickname as the day which brings a spike in divorce inquiries, usually because couples’ problems have been exacerbated during the festive season.
This year family lawyers actually expect a lower number of enquiries as many couples have already decided to split due to the impact of the pandemic. Inquiries through 2020 were up 250 per cent compared with 2019.
While couples of all ages have been affected by lockdowns, the over-60s are leading the divorce trend. Here, Legal and General Financial Advice chief executive Sara McLeish offers some tips around getting a fair settlement later on in life.
Today marks ‘Divorce Day’ which has long held its nickname as the day which brings a spike in divorce inquiries, usually because couples’ problems have peaked during the festive season
Splitting from a partner, at any stage in life, can be many things – sad, painful, liberating – but determining a fair financial outcome is almost always complicated.
Of course, no one enters a marriage thinking it will end, but it’s important to be prepared if it does.
Lockdown has created a strain on many relationships. Anxiety levels have been high as couples have been stuck at home together, without their usual distractions and support networks.
Having seen an initial rise in April, Citizens Advice say views of its divorce webpage were up 25 per cent on the first weekend in September, compared with the same date in 2019.
While this has impacted couples of all ages, divorces are rising most amongst the over 60s. For this age group, it’s especially important to understand how divorce can affect future finances and retirement plans.
The emotional stress of a divorce is hard to avoid, but the consequences of an unfair split can impact financial independence for years to come. Our recent research found more than one-third of people over 50 see their incomes reduce after a divorce, with an average fall of £10,650.
Over a quarter of divorcees also save less for retirement following separation, impacting their ability to enjoy a comfortable retirement.
Divorces are rising most amongst the over 60s. For this age group, it’s especially important to understand how divorce can affect future finances and retirement plans
When you enter a marriage, it pays to talk regularly about your finances and look ahead to tackle the potential ‘what ifs’.
In many relationships, one person handles the finances, but an unexpected event, like a divorce, confirms the shortcomings of this approach.
Talking about joint and family finances regularly means that you’re both aware of what’s going on. When going through a separation, it’s helpful to know the facts – what savings and debts you have – before negotiations begin.
Over a third of couples we surveyed thought the divorce process was financially unfair, yet only 3 per cent sought professional financial advice. Instead, couples were four times as likely to seek advice from friends.
Close friends and family can be a wonderful support network to lean on but remember that they are also likely to be emotionally involved. A good adviser has deep expertise and can approach the situation objectively, helping you to understand the best path to a fair separation.
The biggest question in a divorce is usually what to do with the family home. Not only is it the biggest asset most of us have, but it often comes with a lifetime of memories. There is an emotional and financial trade-off to think about.
While someone may wish to keep it, ongoing bills, the mortgage and maintenance costs need to be carefully considered. There is no point keeping the family home if you can’t afford to.
Sara McLeish’s ‘top tips’ to ensure a fair divorce settlement
1. Discuss your family finances regularly as a couple
2. Look ahead to tackle the potential ‘what ifs’ in the relationship
3. Seek support from friends but engage a financial adviser early on too
4. Don’t let emotions cloud your judgement on the family home
5. Take pensions into consideration and seek advice if unsure
In cases where someone keeps the house, there are a few options to explore. In rare cases, it may be possible to buy the other out. Where that’s not an option, equity release could be another avenue available to ensure both parties get a fair deal.
While couples often consider the value of their family home, there may be pensions and savings to think about too. During a divorce, just 12 per cent consider pensions in a settlement and a quarter actively waive their rights to them, despite the fact you could be entitled to some of your ex-spouse’s pension.
In many cases, women have less personal pension wealth than men, and financially, divorce tends to disadvantage women, so it’s important not to ignore your partner’s savings during the negotiations, in favour of the home.
Bringing in a financial adviser, as well as a solicitor, can help ensure all financial elements at play are fairly considered. Solicitors often get told to ‘leave’ the pension, as the emotional costs of battling over it are too high, but it’s important to know what you may be entitled to.
For some, a divorce can eventually be a liberating and positive experience. An unfair settlement, however, can cause financial issues for years to come, particularly if you are approaching retirement.
While you may not think financial advice is essential, engaging someone in the process ensures you know your options and get a fair deal.
Talking about your finances as a couple also helps to avoid nasty surprises down the line. While it is always going to be an emotional and complicated experience, effective planning can help you both embrace a fresh start on an equal footing.
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