Getting divorced in retirement

It probably goes without saying, but getting divorced in retirement will mean that the family assets have to be divided. While this process is necessary during any divorce, the value of those assets could be a lot more substantial among those in retirement – particularly when it comes to pension pots and family homes – while generational differences could mean some retirees in particular have little in the way of personal wealth if they weren’t working. It’s therefore important to facilitate an equitable division as far as possible, and is why seeking both financial advice and legal support is essential, even if the divorce is amicable. 

In all likelihood, yes, pensions will need to be shared in a divorce. There are various methods in which this can be achieved, from a simple split (known as “pension sharing”) to “earmarking” funds to be divided at a later date, if applicable. However, there’s also the option of “offsetting”, whereby one party keeps the pension in return for the other keeping an asset of equal value, such as the home. Yet given the often high value of pension pots and the complexity of pensions in general, it’s often worth consulting the professionals to determine the best course of action, particularly where final salary schemes are involved, which can add another layer of complexity into the mix.

The family home will probably be the biggest concern for anyone getting divorced, as one or both parties involved will usually have to leave it. Yet this in itself could prove difficult for those in retirement – mortgage borrowing is a lot more restricted to those in later life, which means if one party hopes to buy out the other and needs a mortgage to do so, they’ll face particularly tough affordability criteria. The other option could be to sell the home and buy two separate properties, ideally outright in order to avoid the need for mortgage borrowing altogether. Yet for those looking to unlock the equity in the marital home without selling or taking out a traditional mortgage, equity release could be a solution. 

There are probably a lot of other joint finances that will need to be untangled during a divorce as well, perhaps joint bank accounts and/or savings accounts, as well as credit accounts and household bills. It’s important to contact the relevant companies to make them aware of the situation and start the process of untangling – either by removing one party from each account, or cancelling everything and starting afresh – and you’ll need to make sure that all bills continue to be paid on time less one or both of your credit scores are affected (this applies to the mortgage as well). You may also want to make sure that your ex-partner can’t take any savings from joint accounts or run up more debt on joint credit cards while things are being disentangled. In this case, you’ll want to consider freezing any joint accounts, or even applying for an injunction so your ex can’t dispose of assets.  

The will is always going to need rewriting in a divorce, but older divorcees will need to take an even closer look at all relevant financial agreements, such as life insurance policies that may have been taken out decades ago, and pensions that may have been forgotten about, to change the beneficiary accordingly. 

Divorcing in retirement is certainly never going to be straightforward. Aside from the usual financial wrangling, both parties will have to deal with the potential consequences of being a single person with half the assets, which may not offer as comfortable a lifestyle as their previous arrangement, particularly if they’ve left the workplace and have limited ability to earn more to boost the coffers. This is why seeking suitable advice is paramount in this situation, and is where independent financial advisers and legal experts come in.