Divorce proves to be costly in retirement, according to Prudential study


New research from Prudential has found that a divorce can cost couples up to £3,800 a year in retirement income.

According to the study, the annual income for divorcees deciding to retire in 2018 is £17,600 per annum. In comparison, those who have never experienced divorce on average took home £21,400 from their pension.

According to the latest Office for National Statistics (ONS) figures, which Prudential analysed, the number of people getting divorced has started to rise again. The data reveals that those over the age of 55 saw the greatest increase in 2016 compared to 2015 (the latest period for which data is available).

Prudential is therefore worried that more people might be reaching retirement with a significantly lower annual income, which they might not be aware of.

The findings of the latest study also showed that nearly one in four divorces are likely to retire in debt (23 per cent), compared to nearly one in six for people who have never been divorced (16 per cent).

The only positive to take away from the study is that although they are more likely to be in debt, their debts tend to be lower in retirement – £30,500 compared with £36,900.

Divorcees are also more likely to have no pension savings at all when they retire (15 per cent) than those who have not experienced a divorce (11 per cent).

Clare Moffat, Pensions Specialist at Prudential, said: “Divorce can have a huge financial impact on people’s lives. Many may not realise that the cost of divorce can last well into retirement, as divorcees expect retirement incomes of nearly £4,000 less each year than those who have never been divorced.

“The stress of getting through a divorce can mean people understandably focus on the immediate priorities like living arrangements and childcare but a pension fund and income in retirement should also be a priority.

“A pension fund is one of the most complex assets a couple will have to split so anyone going through a divorce should seek legal and financial advice to help them do so. For many more couples, the increase in the value of pensions means that it is often the largest asset. It goes without saying that advice is crucial as early as possible in any separation where couples have joint assets.”

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