Number of divorcees sharing pension funds increases
There has been an 11% rise in the last year in couples sharing pension funds as part of a divorce settlement.
Research by legal publisher Sweet and Maxwell suggests that as they have few other assets couples are forced to raid their pension funds as part of financial settlements in divorce.
In the past year alone the number of pension-sharing orders made by courts has risen by 11%.
The research sites several reasons for the increase including the fact that the recession has reduced many people’s incomes and the value of assets such as stocks, shares and property values. With the slump in the housing market homes that would once have been a substantial part of divorce settlements are either more difficult to sell or their reduced market value means cash is in short supply.
The same goes for other high value assets such as businesses where money tied up in them can be difficult to realise as the economic downturn continues.
With more couples divorcing in their fifties, when sizeable pension funds are likely to have been built up, pensions are sometimes worth more than property. This is particularly so now that divorce among the over-60s – the group with the highest value pension funds - is at record levels. But it means one spouse could have less money to live on in old age than they had been expecting.
The number of divorces among couples in this age group rose by 4.2% between 2007 and 2009 - the latest period for which figures are available.
The result is that an increasing number of settlements now include arrangements to divide the principal earner’s pension fund.
Under a law that came into effect in December 2000, spouses were for the first time entitled to half of the main earner’s occupational - not state - pension on divorce when courts divided their assets. In most cases, the pot is split into two new funds at the time of divorce to achieve a clean break.
These pension-sharing orders were seen as improvement on earlier schemes where retirement funds could be offset against other assets at the time of the divorce, or where one spouse could receive a share of the other’s pension when they retired.
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