Divorce in retirement: What happens to pensions, savings, property and other assets?

Divorce in later life is becoming more common. Longer life expectancy, changing social attitudes and greater financial independence within many marriages all play a part. For many, retirement brings an opportunity to reassess priorities and lifestyle choices, sometimes leading to the difficult decision to separate.

However, divorce at this stage of life can feel particularly unsettling. It may still come as a surprise to one party, and the practical and financial implications can be significant, especially after a long marriage.

Wider family considerations

A separation in retirement rarely affects just the couple involved. Adult children and grandchildren may also feel the impact, both emotionally and financially.

For example, adult children may still be living at home or relying on parental support to get onto the property ladder. Plans to assist with deposits or provide financial help may need to be reconsidered. Similarly, grandparents who had expected to play a regular childcare role may find this affected if their own financial circumstances change or if they need to continue working.

The legal position: no-fault divorce

Under current law in England and Wales, divorce is based on the principle that a marriage has irretrievably broken down. Either spouse can apply, or the application can be made jointly. It is no longer possible to contest the divorce itself on the basis that one party does not agree.

For some, this can be challenging, particularly where the decision to separate is unexpected. However, the focus of the process is less on the reasons for the breakdown and more on reaching a fair financial settlement.

Divorce or separation

In some cases, couples in retirement may choose to remain married but live separately. This can be for financial or personal reasons, particularly where there is a wish to avoid the immediate impact of divorce on pensions or other assets.

A separation agreement can record the financial arrangements between the parties. However, it is important to understand its limitations. For example, pension sharing can only be achieved through a formal court order within divorce proceedings. There may also be other reasons why a divorce is preferable, such as future remarriage or the need for financial certainty.

Taking advice at an early stage is important to ensure that the approach chosen properly reflects your circumstances and does not leave you financially exposed.

Financial considerations in retirement

Divorce in retirement presents a number of distinct financial challenges.

Retirement plans are often based on a joint income and shared living arrangements. Separation may require those plans to be revisited entirely. Health considerations, housing needs and the ability to generate additional income can all become more significant factors.

Rehousing can also be more complex. Access to mortgage finance may be limited, and decisions made earlier such as retiring early or purchasing an annuity may reduce flexibility. Long-standing plans, whether for travel or gifting to family members, may also need to be reconsidered.

Pensions and financial settlement

For many couples in retirement, pensions represent one of the most valuable assets, alongside the family home. Whether pensions have been drawn or remain largely untouched, they will need to be considered carefully as part of any settlement.

The court has three main options when dealing with pensions:

· Pension offsetting, where one party retains their pension and the other receives alternative assets

· Pension attachment orders, which are now less commonly used

· Pension sharing orders, where a percentage of one pension is transferred to the other party

Each option has different implications. For example, offsetting may involve retaining the family home or other investments instead of a pension interest, but it is important to consider whether those assets can generate sufficient income.

Pension sharing orders, by contrast, can provide a clean break, with a defined portion of the pension becoming the receiving party’s asset. However, valuing pensions particularly where public sector schemes are involved can be complex, and specialist advice is often required and encouraged by the courts.

Taking advice

Divorce in retirement where resources might be limited requires careful consideration. Decisions made at this stage can have a lasting impact on your standard of living and long-term security.

Specialist advice can help you understand your options, navigate the process with confidence and work towards a fair and sustainable outcome, taking into account both your immediate needs and your future plans.

Contact our team:
Sunita Chauhan s.chauhan@gullands.com
Julie Hobson j.hobson@gullands.com
Amanda Finn a.finn@gullands.com