TOMORROW is officially Divorce Day — the date law firms see a huge spike in split enquiries following the festive break.
The tensions of the Christmas season compounded by the idea that many people want to start the New Year with a fresh outlook means relationships start to crumble.
Searches for “how much does it cost to divorce” rocket at this time of year.
And experts say if you are taking the plunge, you must protect your finances.
This comes as research shows that women in particular lose out when it comes to the end of a marriage.
Data from Scottish Widows reveals that not discussing pension assets can cost women more than £77k at retirement on average.
Meanwhile, at least 60 per cent of divorced women don’t discuss pension assets during divorce. Scottish Widows pensions expert Susan Hope says, while emotions run high during a split, divorce must be seen as a clear-cut transaction.
She said: “There are many financial pitfalls when it comes to divorce, particularly for women.
“Having been through this twice myself, I feel like I can talk about it from a position of experience.
“Looking at the stats, 42 per cent of women are facing retirement poverty. That goes up to 60 per cent for divorced women and 75 per cent for single mothers.”
Susan continued: “The key thing people are thinking in a split is short-term security, either for themselves or their children.
“That includes keeping the familyhome, keeping the children safe and arranging custody of the children. But unfortunately, that avoidance of looking at the long-term is hugely detrimental for women. Often there are very heightened emotions. They’re so focused on the short-term, it’s not seen as the financial transaction it should be.”
And while warring would-be exes are quibbling over their property and its contents, one of the major financial assets people forget about is pensions.
In fact, the pension is generally the second biggest asset after the family home.
Susan said: “Either people are thinking ‘let’s get this done as quickly as possible, or get the best possible deal for the short-term commitments I’ve got, i.e. usually childcare or maintaining the family home’.
“And that’s why we’ve got this problem of women on average losing out on up to £77,000 because you’re quibbling over what’s in the bank account.
“There was one couple who spent £10,000 arguing about Christmas lights and we all remember the case of the man wanting his kidney back that he’d given to his wife.
“What you’ve got going on here is fights about immediate assets, but you’ve got the workplace pension sitting quietly in the corner, potentially worth more than all of what’s being fought about.”
Last month the Law Commission launched a document to look at changing the UK matrimonial act, which was first set in stone in the 1970s. One of the potential areas of reform is whether sufficient account is taken of pensions when dividing the assets.
Susan said: “That’s a long-term move, but it’s a move in the right direction because they absolutely should be front and centre.”
In the meantime, the expert said women must arm themselves if they are planning to divorce in 2025.
She said: “There are practical tips that everyone can take. The first is to understand what you’ve got.
“Know what your state pension entitlement is, what your workplace entitlement is, how much it’s worth, and what your previous pensions are worth, and where they are. When you understand that, you can apply that to your partner as well.
“You need to have in black and white, written down, a clear picture of what the value of all the pensions are.”
REVIEW YOUR BUDGET
EVEN if you’re happily married, experts say it’s vital to review finances together once a year.
Susan says: “See the pension as a family asset. Every January, sit down and look at your overall assets and exactly what you’ve got. Because that’s key.
“The amount of stories I’ve heard where pensions have been hidden or undervalued, that can’t be allowed to happen. It’s up to us to educate ourselves on what the family has, or what I have contributed while off work looking after children.
“If you think about the motherhood penalty, it hits us with pay progression and pension. So we have to understand we’ve been contributing to a family in a different way and what’s been happening on the financial side in the partner’s pension.”
Once you know your pension situation, it’s time to be objective, the expert insists.
She said: “The emotion needs to be taken out of it and this needs to be looked at as a financial transaction.
“You can look at all the assets, have a clear picture and then understand what the implications are of different courses of action.
“Pensions are not legislated for and most couples go with a 50-50 equitable split, but we’ve got issues with that. Lots of people want to avoid legal fees so they’ll do a DIY divorce and there’ll be an assumption that everyone’s being open and honest, which is not necessarily the case.
“Also financial advisers are brought in too late and they’re the experts. They will be able to model potential courses of action regarding the pension asset split in terms of future income potential.
“Once you get divorced and you’re 20 years down the line, that’s when the pension is going to start hitting, and then that’s the point where you think, ‘I’m completely lost now’. And that’s what we’re seeing.”