Divorce can cost £2,100 a year in lost retirement income

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Research by Prudential reveals divorcees are more likely to delay retirement plans. Their expected retirement incomes are on average £2,100 less than those who’ve never been divorced.

People planning to retire this year who have previously been divorced will be taking a hit of £2,100 a year on average in their expected retirement income, according to new research from Prudential(1).

The insurer’s ‘Class of’ study, which tracks the future plans and aspirations of people planning to retire in the next 12 months is now in its eighth year. This year the research found that for the ‘Class of 2015’ divorcees, the average expected retirement income is £15,700 compared with £17,800 for those who have never been through a marriage break-up.

Prudential’s research highlighted that the impact of divorce on retirement incomes is something that will impact a significant number of this year’s retirees – more than one in three (35 per cent) have experienced a divorce.

One in five (20 per cent) ‘Class of 2015’ divorcees will retire with outstanding debts, averaging £22,100. Those who have never divorced will carry a slightly smaller debt burden into retirement (average debts of £21,700).

Prudential’s results also show that people approaching retirement who have been divorced (13 per cent) are more likely to delay the date of their retirement compared with those who have never been divorced (11 per cent).

One in five (19 per cent) of retirees who have been divorced expect to live in retirement with an income below the Joseph Rowntree Foundation(2) (JRF) minimum income standard for a single pensioner of £9,500 –compared with 14 per cent for those who have never divorced.

Clare Moffat, pensions specialist at Prudential, said: “Although the emotional impact of divorce may have long passed, it could come as a shock for people to find that it continues to impact them financially into their retirement. A pension fund is likely to be one of the largest and most complicated assets a couple will have to split in the event of a divorce.

“The support of a professional financial adviser or retirement specialist should help ensure that any financial decisions taken have the least possible impact on incomes available later in life. Professional advice is particularly important in the face of the recent changes to pensions legislation and divorced retirees acting on advice received under the previous rules may want to consider seeking updated advice on any post-retirement plans they have made.

“During a divorce the costs can quickly mount up, with legal fees, the cost of setting up a new home and the effect of splitting any existing retirement savings all potentially impacting the ability of those involved to continue saving into a pension. Unfortunately divorce is most likely among those aged 40-44(3), the period in many people’s lives when earning potential peaks and the most valuable pension contributions can be made.”

1. Research Plus conducted an independent online survey for Prudential between 21 November and 4 December 2014, among 7,687 UK non-retired adults aged 45+, including 1,012 intending to retire in 2015.

2. Figures taken from the 2014 update of the Minimum Income Standard for the United Kingdom, published by the Joseph Rowntree Foundation http://www.jrf.org.uk/publications/minimum-income-standard-2014

3. Office for National Statistics - Divorces in England and Wales, 2012 – key Findings http://www.ons.gov.uk/ons/rel/vsob1/divorces-in-england-and-wales/2012/stb-divorces-2012.html#tab-Key-findings

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Ben Davies
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