Well, yes, OK

Divorced women are missing out on pensions wealth, with some losing hundreds of thousands of pounds in a break up, a former minister has said.

Sir Steve Webb said women end up as “poor relations” when it comes to pensions following the end of a marriage.

The average over-50s married couple has three times the pension wealth of the average divorced woman of the same age group, according to analysis from Royal London, the pensions provider.

Couples over 50 typically have a £454,000 pot compared with the average £131,000 for divorced women. Meanwhile, divorced men in the same age group have pension wealth of about £235,000.

That would seem to mean that it’s the men who go out and make the earnings which lead to their having pensions wealth, wouldn’t it?

40 comments on “Well, yes, OK

  1. Isn’t it very common for the woman to take the house, and for the men to keep the pension (crudely-speaking)?

    Tangential question – how is the before-tax nature of valuing pensions dealt with in divorce, anyone know?

  2. Two people tend to have more money than one person, shock horror. It’s as though ‘counting’ is a foreign language.

  3. It’s only fair that the women take everything, house, pension, earnings. Oh, and have instant “no fault” divorces too. That way we can strengthen the family.

  4. “Couples over 50 typically have a £454,000 pot”

    Not unless they are both public sector workers.

  5. “Couples over 50 typically have a £454,000 pot compared with the average £131,000 for divorced women. Meanwhile, divorced men in the same age group have pension wealth of about £235,000.”

    So the divorced couple have (on average) £366,000 between them, against £454,000 for the couple who stay together.

    Not sure why (better long-term thinking by those who stay married? high housing costs meaning that people on benefits find it easier to split up? don’t know), but never mind why – the point is that they’ve less pension money anyway, irrespective of how it’s split between them.

  6. If you’ve got a personally invested pension pot, it’s conceivable (though there may be tax issues) that half could be given to a divorced spouse. But if your ‘pot’ consists of a future promise to pay pension from an existing or previous employer, how can that be transferred?

  7. Okay, I fail to see why any of us should care about strangers who structure their life and make decisions which means they have less pension money than they would have otherwise had had they made different choices.

    Anyone want to run a report on our alternate timeline selves where we all made career decisions where we’d be richer?

  8. Even with final salary pensions there is a valuation method so that, on divorce, the pot can be shared. That gives 3 options to the divorcing couple …
    1) Find the cash to pay out the other person’s share of the pot.

    2) Establish an order on the pot so that it pays out proportionately to both parties when retirement begins.

    3) Get a “pension sharing order”, which effectively splits out the other person’s share into their own pot, without waiting for retirement age. This one is useful if there is a significant age difference.

    Guess who got divorced last year…

  9. Andrew C,

    Your point is taken, but is hyperbole.

    The average (which is what ‘typical’ implies), includes both public sector and non-public sector pensioners, and not simply the latter. Presumably, if the latter have smaller pots, the former have bigger, but ‘typical’ still includes both.

    Incidentally, the ONS counts 5.36 million in the public sector against 27.04 million workers in the private sector, so if you are right, the public sector pots must be vast – and they can’t all be. Certainly not for cleaners. What about the pension pots of ‘captains of industry’ and bankers in the private sector?

  10. ExcMan
    to suppose ‘typical’ implied ‘average’ will not do. A median or mode would be a better candidate for ‘typical’

  11. What about the pension pots of ‘captains of industry’ and bankers in the private sector?

    Much of their earnings will be non-pensionable, especially in defined benefit schemes.

  12. I may be completely wrong here (if I am I’m sure someone will correct my misaprehensions) but IIRC there is no “pension pot” for members of the Civil Service or other central government employees and when they retire their pension rate is derived from final salary, average salary, or whatever scheme they are on at the time. Then a notional pot is calculated backwards using annuity rates – ie the size of pot necessary to provide the pension that they are receiving – and they can take a percentage of that tax free as a lump sum. Nice work if you can get it!

  13. “according to analysis from Royal London, the pensions provider … Couples over 50 typically have a £454,000 pot”

    A rival provider, Aegon (formerly Scottish Equitable), says that those aged 55-65 have an average pot of £105,496. Upstart provider PensionBee has similar figures.

    The only way to explain such a large discrepancy is that Royal London’s numbers must include an imputed pot for defined-benefit pensions.

  14. djc,

    Average is a loose term, perhaps less loose than typical, but certainly looser than median or mean. What would be the correct metric?

    For some folk, ‘more than me’ implies ‘bastard’, ‘lots more than me’ implies ‘utter bastard’, while ‘less than me’ implies ‘can’t care much’ and ‘lots less than me’ implies ‘can’t care a flying feck’. For folks who strongly entertain the idea that all public sector pensioners lie in the ‘utter bastard’ camp, one suspects a mixture of jealousy and politics!

  15. @ Chris Miller
    The court awards the wife half the man’s pension so that she gets an annuity on his life (this is done by lawyers, making it legal).

  16. @Baron Jackfield

    “they can take a percentage of that tax free as a lump sum.”

    No, the tax free lump sum is usually calculated as a multiple (usually 3x) of the pension not a % of a notional pot.

  17. @Excevator man

    I was querying where the figure came from.

    A quick google revealed

    “On average those aged 55-65 currently have £105,496 saved in pensions, according to research released by Aegon [in June 2016] “

  18. @ Richard
    If the court awards half Mr Y’s pension to the former Mrs Y, Mr Y may thereafter stop paying into that pension and start paying into a new one.
    However I think that most of the difference is due to the ex-wife getting the house mortgage-free and the ex-husband keeping his pension.

  19. @ Andrew C
    If I include the value of the DB pension I receive from my former employer, my pension pot is over £454k. So I beg to differ.

  20. Decisions have consequences.

    ‘some losing hundreds of thousands of pounds in a break up’

    So don’t break up.

    By Anna Mikhailova, Political Correspondent

    I can’t see the whole article. I assume Anna’s goal is to remove the consequences for women. Cos they are snowflakes who need special protection (today only – tomorrow she will demand they be combat troops).

  21. So the divorced couple have (on average) £366,000 between them, against £454,000 for the couple who stay together.

    Not sure why

    I expect because you’re sharing costs – freeing up cash for larger voluntary contributions – and sharing duties, freeing up time to pursue better-paying roles.

  22. I have 2 db pensions – one public sector (well, okay, a mash of the recent public sector schemes) and one private sector. Total nominal pot value (at the ridiculously low 20 time multiplier) is a bit over £430k.

  23. What Tim N said.

    Big chunk of your cash goes to paying the lawyers to fight over the distribution of what’s left and your costs are then higher, ergo less free cash to fund the pension thereafter.

    Why is this even news? Or rather, why is this not spun as “getting divorced has big long term consequences. So think carefully before you get married and be nice to each other after you do.”

    But that’s less interesting to bitter middle-aged divorcees. 🙂

  24. @Andrew C – January 7, 2019 at 12:55 pm

    No, the tax free lump sum is usually calculated as a multiple (usually 3x) of the pension not a % of a notional pot.

    Thanks Andrew. I’ll stop feeling so upset about it in future. 🙂

  25. Would be more informative to see the total assets I think. But would also be handy to see how the share in total assets changes between the moment of divorce and the age 55 (or whatever) snapshot. Even if the assets are split pretty evenly I’d expect the advantage to shift to the man over time due to higher earnings post divorce, on average.

    Also would be interesting to see the distribution of assets at the moment of divorce for divorcing couples vs the distribution at a matching age for couples that stayed together. Are richer couples less likely to divorce? I’m torn between that and the single life being more expensive as explanatory factors for that “couples worth more than the sum of two singles” result.

  26. Oh and the PG says, the cost of the divorce itself puts some distance between the still-married and divorced couple!

  27. “So the divorced couple have (on average) £366,000 between them, against £454,000 for the couple who stay together.”
    And there are already some theories to explain this. Here are two more:
    1) The more comfortable, more prosperous, couples are less likely to divorce.
    2) A divorced couple needs 2 houses, which will eat into the savings

  28. “john 77

    @ Andrew C
    If I include the value of the DB pension I receive from my former employer, my pension pot is over £454k. So I beg to differ”

    Oh, well, if your own pension pot is over £454k that proves that the average must be that.

  29. @ Andrew C
    Are you trying to provoke me?
    It is possible for a couple to have a pension pot of £454k without both being in the public sector. I exist and have never worked in the public sector. QED

  30. Rob, in Scotland at least, the answer is yes. I have a client going through this as we speak.

    In this case the client is female, with a business, and she is the one being robbed, by a complete waster.

  31. @ Rob
    That *should* be part of the equalisation process – the total assets should be equalised but they don’t make transfers both ways, just a net transfer from the big pot to the small one if there isn’t enough liquid assets to balance things otherwise.
    It can get involved – I once knew a highly talented and physically attractive doctor in his 40s who had been divorced three times (I knew not why and did not choose to ask: his concern for the local cummunity could eithrer have been a cause or an effect), so he lived in a rented one-bedroom flat while his ex-wives lived in houses.

  32. @john77…

    Re your doctor friend… I have a friend like that, he’s presently on his fifth marriage – I can only assume that he’s addicted to wedding-cake. 🙂

  33. What expectations does a woman who is about to become the 5th Mrs X have about the marriage?

    Triumph of hope over excellent experience doesn’t cover that one.

  34. Had a friend used to say he paid for his house 3 times over, once when he brought it, once when he broke up his original business partnership and used it as collateral to setup his own business and once when he divorced to buy out his wife

  35. Nonsense

    Pension wealth (or at least the predicted value) is taking into account in divorce proceedings

    In my experience what happens is the wife gets the house and maintenance (spousal and child)

    Investments are shared equally

    The husband gets to keep part of his pension, with a proportion subject to a pension sharing order with his ex-wife

    Allegedly this gives each a roughly equal division of family wealth with financial provision for children

    What it means is the ex-wife carries on rather well, never remarries but finds another partner and the husband is reduced to penury as he has to fund new accommodation (and cannot realistically have extended contact with his children until he finds some), pays off marital debt and maintenance in the hope he lives long enough to enjoy his pension

    I would also note that a DB pension can be reasonably accurately forecast while the ex-wife benefits from an appreciating asset when it is eventually sold

    This is direct personal experience, and yes I am bitter

  36. starfish: odd, that’s different to my experience. Growing up in the 1970s/80s, discreet inquiry comparing with friends, the standard settlement was Dad got the house, Mum got the kids.

  37. @jgh

    Well I am afriad it is a common experience of many of my colleagues

    The dice are loaded, the table is bent and cards are marked against husbands, at least those who don’t try to cheat or abscond

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