A study for wealth manager St James’s Place has revealed major regional differences in pension sharing on divorce, some of which could negatively affect women.
An SJP study found that in Northern Ireland pensions are shared in only one in 14 divorces compared to one in eight in England &Wales figures.
SJP found that since 2016 only 971 of 14,274 NI divorces included a pension disposal agreement.
Pensions are split between couples in Northern Ireland in only 7% of divorces, the research uncovered.
A Freedom of Information request (FOI) by SJP, found that, between January 2016 and August 2022, fewer than 1,000 of the 14,274 divorces that were settled in court in Northern Ireland included a pension disposal by way of a sharing or attachment order.
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SJP says this shows that proportionately only half as many pension-sharing or attachment orders were secured in Northern Ireland compared to England & Wales, where 80,290 of 602,491 were secured.
A pension sharing order is a legally binding agreement to divide pension assets at the time of divorce. A pension attachment order is another way to split a pension on divorce but does not result in a clean break. The pension remains the property of the ex-spouse. SJP says this can cause a number of issues, especially if the divorce is acrimonious.
The impact of not sharing a pension could be more significant for women, SJP warns. According to data from SJP’s latest Financial Health Index, women hold on average £85,500 less than men in workplace-based or privately-organised pensions.
Lisa Burke, a senior partner with SJP and principal of Devine Wealth Management in Magherafelt, said: “It’s clear that relatively few people in Northern Ireland are properly considering the importance of including pensions in any divorce settlement.
“While it is hard to know why definitively, it may be that for those divorcing at a younger age, they will prioritise the children and their property and disregard any pension pots. Those divorcing later, perhaps when the children have left home, may consider an amicable settlement most important and do not want to enter into a fight about pensions if they have otherwise divided their assets.
“In all scenarios, there is undoubtedly a lack of knowledge about quite how significant an asset a pension can be, and that it is often the second biggest or even the largest asset of a married couple, and that both parties could have a claim on that pension pot.”
Claire Trott, divisional director of retirement and holistic planning at St James’s Place, said: “The importance of pensions when considering divorce should not be underestimated. There are many different options available to both parties with regards to financial settlements and the easiest option at the time may not be the right choice in the long run.
“Pensions in particular can’t just be considered a monetary asset and, taking into account things such as health and life expectancy, a 50/50 split isn’t going to give a fair outcome. This can be even more apparent if you choose to offset one asset against another. For example, exchanging the pension for the house. You need to be clear of the true long-term value of each.”
