The pension mistakes many divorcing couples don’t realise they’re making

New research from L&G shows one in seven people who divorce after 50 delay retirement, often with less time to rebuild savings or retirement plans.

In response, L&G has pulled together practical tips and real-life case studies showing how easy it is for people to unknowingly damage their long-term finances during separation.

One such case study is Sarah, 64, who divorced at 59 after several years of separation. Believing financial advice was unaffordable, she and her ex-husband handled the divorce themselves and kept their own pensions, leaving Sarah unaware she could have pursued a share of his larger occupational pension.

Alongside the case studies, L&G has shared practical advice to help people protect their finances at any stage of divorce, including:

• Set a realistic budget that accounts for your new living costs but also any legal fees, shared debts or ongoing commitments
• Make sure you have a complete understanding of the costs you’ll incur as you divorce and make sure it covers everything, such as a Clean Break Order, to protect your finances in the future
• Review all your assets, including pensions, to ensure nothing is overlooked in the settlement
• Update important documents, such as your will and life insurance policies, ensuring your named beneficiary reflects your new circumstances.

To support people going through separation, L&G also offers a Divorce Financial Health Check, a free online tool designed to help people understand the key financial considerations during divorce and avoid overlooking important details

L&G Divorce Day Case Studies

Sarah, a 64-year-old admin assistant, divorced at 59 after several years of separation. Although the split was amicable, neither she nor her former husband had much financial security, and Sarah retained the family home until mounting debts and an unstable income from her small business forced her to sell it in 2016. Believing financial advice to be unaffordable, the couple handled the divorce themselves and kept their own pensions – leaving Sarah unaware of the value of her entitlements or that she could have pursued a share of her husband’s larger occupational pension.

The financial repercussions of the divorce, combined with years of irregular earnings, substantial shared debts (of which she carried the majority), and the need to support her son, had a long-lasting impact on her stability and ability to save for retirement.

After her business collapsed during the pandemic, Sarah relocated to Lincolnshire to be closer to her elderly parents, still managing debt and with limited capacity to build up retirement savings. She is due to retire at 68, but will continue to work for as long as she can.

Sarah has just reactivated her life assurance plan after cancelling it for a number of years due to not being able to afford this and hopes to have paid off all her debts soon so that she doesn’t leave these behind for her son. While she is slowly becoming more secure thanks to recent financial support and advice, she believes her long-term financial outlook has been significantly affected by the divorce and by not receiving proper guidance at the time.

Jilly, a 59-year-old ex-IT worker, was in what she describes as a happy marriage until her husband unexpectedly left her in her early 40s after meeting someone else and starting a new family. At the time, the couple owned a large family home, had strong careers, multiple cars and a comfortable lifestyle.

The sudden breakdown of the marriage, combined with the death of her mother, and the shock of separation, led to a severe decline in Jilly’s health, leaving her unable to properly engage with the financial aspects of the divorce.

Without seeking financial advice and unaware of her rights around pensions, she accepted a settlement of around £60,000 and waived the right to any future claims, believing assets may have been hidden, but lacking the capacity to challenge this.

The financial fallout was devastating as Jilly experienced homelessness, lived in a caravan, and is now reliant on council housing and benefits due to ongoing ill health. She is still trying to trace pensions from her working life and expects to delay retirement significantly, hoping to return to work when her health allows. Jilly believes the lack of financial advice and the speed and shock of the divorce have had a permanent impact on her financial security.