Almost every week there are reports in the media about the increase in the divorce rate in the over 60s.
Joanna Pratt discusses the five main areas of risk where women can make mistakes which affect their long term financial security when they divorce.
1. Pensions can be the single most valuable assets. A common mistake is for wives to agree to the pension assets to be divided based on the CETV (cash equivalent transfer value), rather than based on equalisation of income from pension assets. Factors such as age, health and life expectancy impact upon the amount of income which an
individual receives from a pension pot. If the husband and the wife receive the same capital amount from the pensions, this does not mean that they will receive the same amount of income from those pensions.
2. Women are often very trusting of their husbands, even in a divorce situation. A wife cannot rely on what her husband tells her the situation is with the family finances. It is essential that full and proper financial disclosure is made. Without this, there is a risk that not all the assets will be taken into account.
3. Identifying and taking into account all debts, whether in the parties’ joint names or their individual names, is essential. This includes not only the obvious, such as an overdraft or a personal loan, but also outstanding credit card debts, finance on cars, hire purchases for furniture etc.
4. Women tend to have a much more emotional attachment to the family home, particularly if it is where the children have spent all or the majority of their life. Wives sometimes try to keep the family home, rather than downsizing. If the family home is bigger than the wife needs, the outgoings may be disproportionately high. The wife may find a huge chunk of her income spent on paying basic household bills.
5. Perhaps most important of all, ensure there is a court order setting out the financial agreement. An informal agreement is not binding and enforceable, even if it is in writing and signed. If no court order is put in place and many years later the husband tries to go back on the agreement, a judge would consider their financial positions at the time of an application to the court, rather than at the time of the separation.
Also, only a court can make a pension sharing order. This is the most common order which is made
with regard to pensions.
A percentage of one spouse’s pension fund is transferred into a pension fund in the other spouse’s
If there is no pension sharing order, and the husband dies, the then former wife is unlikely to receive any ongoing benefit from the pension.
As you will see from the above, there are many pitfalls and risks. Wives must not take the risk of trusting their husband to do the right thing.
However honourable the husband is, and even if he does exactly what he says he will do, there are potential repercussions if he dies, and there is no court order in place.