How divorce can impact a woman’s financial wellbeing

Did you know two in five (41%) marriages end in divorce?

The latest available figures for the Office for National Statistics (ONS) show there were 80,057 divorces granted in England and Wales in 2022 – a 29.5% decrease when compared with 2021 and the lowest number of divorces since 1971.

However, over the longer term, the number paint a very different picture. The number of marriages ending in divorce before their 25th wedding anniversary has increased over time. For couples who married in 1963, nearly one in four (23%) had divorced before their 25th anniversary. This has steadily risen to two in five (41%) for couples who married in 1997.

Divorce is more than just numbers, though. It’s a life-altering event that affects not only the legal status of a marriage, but also the emotional and financial aspects of both partners. While it can be a liberating step for some, it often comes with significant challenges and hurdles to overcome.

The impact of divorce on women and their finances

1. Income

• Divorcees typically experience a significant drop in household income after a break up. However, women are affected more, with average decline in income of 33% compared to 18% for men.
• Factors contributing to the difference include the gender pay gap, career interruptions due to caregiving or childbirth, and how the marital assets are divided.
• This is where it’s important to get your fair share and seek professional advice for making a fresh start after divorce. For example, if your income is significantly lower than your ex-spouse due to sole custody of your children, you could be entitled to certain benefits, such as child maintenance payments.

2. Pensions and retirement planning

• Women retire with an average pension savings of £69,000, compared to £205,000 for men. A huge difference of £136,800.
• It’s hugely important for your future financial wellbeing that you claim your fair share of your spouse’s future pensions, both state and private. So, make sure you discuss pensions when dividing your assets.
• If your spouse has been building up a pension for years, legal advice from pension experts could be particularly valuable. It might make sense to ask for a pension valuation as part of the financial disclosure, and it can be worth having an adviser check the numbers.
• Once you are divorced, it’s likely you won’t want to leave your pension to your ex-spouse when you pass. If this is the case, you need to change the name of the ‘beneficiary’ or ‘beneficiaries’ registered with your pension provider(s). Your pension savings are not regarded as part of your estate and are not therefore covered by your will.

3. Property and other assets

• Marital property includes any assets built up during the duration of the marriage or civil partnership. Each spouse is usually given a percentage of the total value of property minus any debts.
• During divorce, the couple will agree on the value of the home. And then subtract any outstanding debt (mortgage) to determine the total home equity.
• Property or assets acquired before marriage are treated in different ways. Known as non-matrimonial assets, they include things like personal belongings and investments. They often aren’t counted as part of the matrimonial pot.
• As part of the divorce, it’s important to arrange a financial separation via a Consent Order. This is ensures the ex-spouse cannot make any claim to future wealth such as an inheritance from a family member. The Consent Order needs to be approved by a court to be legally binding.

Seek financial advice in times of distress

Financial planning can be particularly valuable at important life stages or big milestones such as planning your retirement, a death of a loved one or tying the knot. It can be just as valuable when untying that knot to ensure you’re getting your fair share.

The emotional strain that comes with divorce has the potential to cloud your judgement when agreeing how to split assets and savings with your ex-partner. This is where an impartial view from a financial adviser could be vital for many women.

At Charles Stanley, we’re here to help you create a more secure financial future for yourself and offer the support you need during life-changing events. Our highly personalised service allows our financial planners to create a deep relationship with you and create a plan that’s specifically designed to meet your needs.

Find out more about our financial planning services