Average Loss Is £30k By Retirement Age – But Many Don’t Take Financial Advice

A recent Legal & General survey suggests a quarter of divorces in England involve people over 50, which could seriously affect their retirement plans and planning for later life.

Those in their 50s save on average £57 less each month towards retirement after they split, adding up to £30,000 less by the age of 70.

The study also found even though more than a third will see their incomes fall by an average of £10,650, only 3% take financial advice – and that more than two-thirds could be liable for a future claim from their ex.

As part of Talk Money Week, tax planning and family law experts at leading national law firm Irwin Mitchell have some advice for those looking to separate in later life, but are worried about the financial cost of the process.

Expert Opinion

“The study found one in four people who divorce are over 50 and this has a significant impact on their finances in retirement.

“From a financial perspective it can be particularly hard-hitting as there is less time to refill the pot. Loss of pension can be particularly devastating. However, with careful legal and financial advice there are options.

“Couples should take legal and financial advice on what effect their current arrangement together would have on their finances if one of them died. For example, if unmarried you may not be able to claim under your partner’s pension if something happens. Crucially, if you divorce you may also lose this benefit.

“Another popular inheritance tax measure for those in later life who are living together is to marry, to ensure that the survivor benefits from the spouse exemption - assets are able to pass inheritance tax-free to a spouse on death. However, this can create unforeseen consequences as a divorcing spouse will have financial claims that an unmarried partner would not. If a couple goes on to divorce anyway, the benefit may be lost.

“Some may not even view this as an issue – why would you want to leave your ex-spouse anything on your death? But it may useful to be able to do so; perhaps on a life interest trust that can be terminated, or tax-free, to be able to get more assets free of inheritance tax to your loved ones.” Kelly Greig - Partner

Family law experts say that for a later life couple who have no intention to remarry, there are alternatives to divorce altogether, such as judicial separation. Seeking expert guidance and considering all available options can help pave the way for a more financially secure future.

Expert Opinion

“The impact of divorce can be particularly hard on those who separate in later life – from an emotional perspective, the loss of a partner is akin to bereavement.

“One such option, and an alternative to divorce, is judicial separation. This is formal separation that’s recognised by the courts; historically it has been used where a couple is religious and one of them does not want to divorce for religious reasons.

“It can also be used where there is a financial benefit in remaining married. “Crucially, a judicially separated spouse remains entitled to a widows or widower’s pension on death of the other.

“Judicial separation may give more effective options for inheritance planning, allowing the options mentioned above but each situation is individual and dependent on the circumstances involved, so joined up legal and financial advice is the key.” Sarah Balfour - Partner