Divorced women retire with savings 75% smaller than male counterparts

Divorced women’s median pension wealth at retirement adds up to just a quarter (25 per cent) of that of their male counterparts, according to research commissioned by Now Pensions.

The research, which will be published in a report on ‘under-pensioned groups’ by the Pensions Policy Institute (PPI) in the next month, found that divorce has a greater impact on women than men, as divorced men’s median pension wealth is £103,500, a third less than the £156,500 average for men.

Meanwhile, the median pension wealth of a divorced woman was found to be £26,100, just over half of the average woman’s savings of £51,000.

The research also uncovered that, in 2018, divorced women had a private pension income 42 per cent smaller than the UK average - £3,880 compared with £6,650.

Now Pensions chair of trustee, Joanne Segars, commented: “From our extensive work on the gender pensions gap, it is clear that women who are also part of other under-pensioned groups, such as those who are divorced, will see a compounded impact on their savings for later life.

“The modelling we commissioned PPI to carry out has given us an in-depth look at six groups which are under-pensioned because of an inadequate ability to save throughout their working lives. This is often a result of outdated social norms, discrimination and unfair saving schemes.”

Examining the factors behind divorced women’s shortfall, the research stated that divorced women were twice as likely not to be saving anything for retirement compared to divorced men, while they also faced higher housing costs and instability as just 49 per cent of divorced women were found to be homeowners, compared to a national average of 65 per cent.

Additionally, Now Pensions noted that, although pension pots are often the second most valuable asset of a divorcing couple, 71 per cent of divorce settlements do not take pensions into consideration.

Mills and Reeve partner, Phillip Way, said: “Women contemplating divorce must ensure that they are aware of their own and their husband’s pension savings and their likely incomes in retirement.

“For many, it is all too easy to focus on the here and now in what are often distressing circumstances. For example, many women have found that, in keeping the house in a divorce settlement and not looking carefully at pensions, they have put themselves in a poor financial position for the long-term future.”

Women working in part time roles were also found to be more likely than men to in have jobs in which median hourly pay was in the bottom quartile of hourly pay for the wider population, though the proportion of divorced women working in part time jobs (34 per cent) was lower than the average for all women (36 per cent).

Now Pensions demonstrated that further damage could be visited on women’s pension savings by the Covid-19 pandemic, as data from the Institute for Fiscal Studies has shown that mothers are one and a half times more likely to have permanently lost or quit their job since lockdown began.

Furthermore, the research noted that, as divorce rates have spiked since lockdown conditions were imposed, “we could see even more divorced women falling victim to the gender pension gap”.

Insuring Women's Futures co-founder, Jane Portas, commented: “Women’s financial lives continue to be shaped by society’s expectations of them at work and at home, as has been borne out through the Covid-19 lockdown.

"Today, the UK gender pay gap stands at 17 per cent and women’s life-time earnings are a mere fraction of men’s at just 59 per cent, culminating in a multiplicative gender pension gap.”

She concluded: “The complexity of many pension arrangements, the availability of pensions drawdowns, combined with a lack of pensions awareness, simultaneous to the rise in online and quickie divorces, means that in the absence of affordable advice and with pension sharing optional rather than the default, many divorcing women are losing out and risk financial hardship in later life.”

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