For better or worse, we are all of us living longer. Medical advances and changes in working patterns and lifestyle mean that many of us now can expect to enjoy a retirement that may last into our 80s. One perhaps unforeseen consequence of this increase in longevity is a rise in the number of people who are divorcing sometimes in their 60s and even 70s, with the aim of spending such time as is left to them by some means other than being married.
Cases such as this, which can often involve extremely lengthy marriages over several decades, bring with them profound questions as to how best to deal with a financial settlement. As it may well be, sufficient capital is accumulated over that period to allow both parties to rehouse comfortably on their own, but pensions and income can often be a very different matter.
This can especially be true if one party has taken career breaks: or indeed may not have worked in many years raising children. In such cases, the aim is to share any pensions that have accumulated equally between the parties to ensure as far as possible, they both have the same financial support for the rest of their lives. This can often mean complicated actuarial calculation if the pension schemes are particularly large or in the alternative, both parties will have to accept the end of their marriage will result in straitened circumstances for them both.
The state pension must not be overlooked. If one party has an incomplete national insurance contribution record, that can have a significant impact upon the amount of state pension received upon retirement, and lead to an imbalance of incomes. It is also important to remember that the state pension is a benefit, just like any other. Simply paying national insurance contributions does not in and of itself guarantee you a state pension. Should this benefit ever become means tested, this again will have an impact upon how any pension sharing will have to be dealt with.
For those who may be divorcing shortly before retirement age, consideration must also be given (where one party has a very limited earning capacity) as to whether any ongoing form of financial support is concerned by means of spousal maintenance. It is now very rare for a court to award what are known as “joint lives” orders, payable until death. The aim is, as far as possible, to allow the receiving party to reach financial independence, and if there are “a few bumps along the road” on that journey then so be it. Maintenance may continue until pension age or when the paying party retires.
Any increase in the state pension age to 67 (and further increases being mooted), our working ages are likely to extend as our longevity does. Therefore, legal advice is required for clients contemplating divorce, and more careful financial planning may be necessary to ensure a secure future.
Please do give us a call on 01484 810210 to discuss your options and we will do our best to help.
By James Skinner