how to cope emotionally and financially
The number of couples over 60 divorcing has increased. Sarah Coles looks at how to deal with upheaval and properly distribute assets like a pension.
Married couples who can hold on well into their 60s would be forgiven for congratulating themselves on crossing the danger zone of divorce – usually between the ages of 40 and 44 – unscathed.
Unfortunately, they can’t afford to be too comfortable. The number of people over 60 who divorce rose by 85% between 1990 and 2012 – and continues to rise, according to the International Longevity Centre. He calculated that by 2037, nearly one in ten divorcing people will be over 60.
Facing a split at this age can be a horrific shock, both emotionally and financially. We spoke with Zhara Pabani, a partner at law firm Shakespeare Martineau to find out how to deal with the upheaval.
Pabani points out that while divorce is always traumatic, after a long marriage the emotional upheaval is particularly difficult.
She explains: “You are very invested after 30 or 40 years. You may not be in love anymore, but you’ve been with your husband or wife for a long time and you’ve gotten used to it.
“Being alone after so long is incredibly difficult. When it ends, even for the person asking for the divorce, it’s hard.
“I always recommend advice to people going through it.”
Ask for financial advice
Financial trauma can be just as severe, for a number of reasons. In most cases, the couple has gotten used to managing their finances together.
They may have very different incomes that have been split between them and they may have played different roles in managing family finances.
In some cases, the wife or husband has no idea about the financial practicalities of life, because for the past 30 or 40 years their other half has taken care of everything.
It would be quite difficult to learn all of this from scratch, in everyday life, but they are forced to do it in the middle of a divorce, and they have to set up their individual finances from scratch. That’s why Pabani says she always puts people in this position in touch with a financial adviser.
Pabani says: “If there are a few properties – or a very valuable property – plus a large pension and a lot of investments, it is possible to divide them without difficulties – although it is always difficult.”
The family home vs pension assets
Chances are the couple have been in the family home for decades, but Pabani points out that it’s often impossible for either half of the couple to afford to stay.
She says, “It’s hard to part with the family home, because you feel like you’re part of the fabric after so long.
She adds that some people will be so eager to hold on to the family home that they are first willing to give up all other marriage assets in order to keep it.
However, this may not be practical, as they still need a way to generate income. At this age, income comes primarily from pensions, and any divorcing couple must decide what to do with their pension policies and rights.
In this generation, where the wife may have taken time off to look after the children while the husband has built up a pension, her pension may be much larger than his.
While they were together, they may have evened things out through household spending. In the event of a divorce, part of the process is to do it more formally – assuming that it will have to be split 50/50.
Pabani points out: “Retirement is an asset that belongs to both of you: men can find it difficult to adjust to it, because they feel they have earned it, but it cannot be confined if it is not is not necessary for purposes.
There are basically three ways to divide a pension.
Pension offsetting involves balancing the pension against other assets. One half of the couple keeps the pension, while the other takes assets that are worth roughly the same amount. It used to be common because it was the simplest approach, but it’s not always suitable.
In cases where the house forms the bulk of the rest of the marriage assets, it leaves the non-retired member of the couple with a headache when it comes to generating retirement income.
Richard Collins, divorce lawyer and partner at Charles Russell Speechlys, adds that retirement freedoms have made this option less popular, as increased flexibility and inheritance tax breaks mean more people want to keep their retirement assets. retirement.
Earmarking of pensions, on the other hand, means that when a pension is paid, part of it will be paid to the ex-spouse, ensuring that they will both have an income in retirement.
The downside to this approach is that the person who earned the pension in the first place can dictate when they take the money. This leaves the person who assigned a piece of it to wait as long as their ex-spouse wishes.
The final option is pension sharing. This is the clean break and involves splitting a repo into two new pots. It’s not the easiest solution, but it’s increasingly seen as the most appropriate, as it ensures that both people have a pension and both have control over their own income.
To learn more, read our comprehensive guide: Divorce and pension splitting in the UK – all you need to know.
ISAS and other investments
Besides the family home and pension, there may be other investments to share, such as funds, ISAs, stocks and participating policies.
It is essential for a couple to understand the implications of cashing them in and splitting them up.
Now may not be the right time to do so, and with fixed term products there may be additional fees and charges. A spin-off must therefore take all of this into account to assess the best way to allocate assets.
Consider the tax consequences
In the case of relatively well-to-do couples, there is the additional issue of inheritance tax.
Couples often manage inheritance issues between themselves – leaving their half of their estate to their spouse when they die, so there’s no inheritance tax to pay, and their £325,000 abatement can be added to that of their partner.
After a divorce, this is no longer possible, so it is essential to consider your inheritance tax exposure and what can be done to minimize it.
Back to work
On the other end of the spectrum, couples don’t worry about having too many remains when they die: instead, they run the very real risk that there won’t be enough for everyone while they’re alive.
Divorce hurts your finances regardless of your age. Research from Prudential reveals that divorced people have 16% lower incomes – or £3,000 a year – in retirement than those who have never been divorced.
If you divorce when you are 60 or 70, the impact is particularly difficult to live with, because you do not have time to make up this shortfall before you have finished working.
Pabani says: “In a small business with a £200,000 house and modest pensions, we see people who have to go back to work.
“It may suit someone who is young and vibrant and ready to start over, but you get people in their 60s who are old souls and haven’t worked in years – if they ever have. They could never find a job. They may have to move in with siblings or children, or rent until the money runs out and then fall back on the state.
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