People planning to retire this year who have previously been divorced will be taking a hit of £2,100 per year on average in their expected retirement income, according to research from Prudential.
The insurer's 'Class of' study, which tracks the future plans and aspirations of people planning to retire in the next 12 months is now in its eighth year. This year the research found that for the 'Class of 2015' divorcees, the average expected retirement income is £15,700 compared with £17,800 for those who have not been through a marriage breakdown. One in five (20 per cent) 'Class of 2015' divorcees will retire with outstanding debts, averaging £22,100. Those who have never divorced will carry a slightly smaller debt burden into retirement (average debts of £21,700).
Prudential's results also show that people approaching retirement who have been divorced (13 per cent) are more likely to delay the date of their retirement compared with those who have never been divorced (11 per cent).
One in five (19 per cent) of retirees who have been divorced expect to live in retirement with an income below the Joseph Rowntree Foundation (JRF) minimum income standard for a single pensioner of £9,500 –compared with 14 per cent for those who have never divorced.
Clare Moffat, pensions specialist at Prudential, said:
"Although the emotional impact of divorce may have long passed, it could come as a shock for people to find that it continues to impact them financially into their retirement. A pension fund is likely to be one of the largest and most complicated assets a couple will have to split in the event of a divorce.
"The support of a professional financial adviser or retirement specialist should help ensure that any financial decisions taken have the least possible impact on incomes available later in life. Professional advice is particularly important in the face of the recent changes to pensions legislation and divorced retirees acting on advice received under the previous rules may want to consider seeking updated advice on any post-retirement plans they have made.
"During a divorce the costs can quickly mount up, with legal fees, the cost of setting up a new home and the effect of splitting any existing retirement savings all potentially impacting the ability of those involved to continue saving into a pension. Unfortunately divorce is most likely among those aged 40-44, the period in many people's lives when earning potential peaks and the most valuable pension contributions can be made."
At Garratts our family team offer expert advise on the implications of divorce on your finances and divorce. Please call our team on 0161 665 3502 for an appointment. We provide a comprehensive preliminary discounted first meeting at a cost of £120 after which we confirm our advice and the action to be taken in a detailed yet clear letter.