June 28, 2013

Unpicking the headlines on retirement income

It has been interesting to observe the considerable amount of column inches devoted to a new survey conducted by Prudential, indicating that divorcees planning to retire in 2013 will lose out to the tune of £2,600 per year in expected retirement income, compared to those who have not been divorced.

The findings were based on a sample poll of more than 1,000 people intending to give up work this year. Of those, 40 per cent had been divorced. If we look at the people behind the statistics it becomes a little clearer what the issues are – and how we have arrived at this situation.

In my experience, helping separating couples to manage their situation when retirement is on the horizon often brings a much needed clarity to the financial situation that helps both parties agree on a fair and equitable division of assets.

Let’s imagine an average Mr and Mrs X – who are in their 40s and have been married for 20 plus years – at the breakfast table.

Mr X has worked for his present employer for 10 years and each month deductions from his salary are paid into a company pension scheme. His employer also makes a substantial contribution, though Mr X is unsure of the precise amount.

Mr X’s employment history may be such that there could be several pension funds, but he’s vague on the precise details. His wife may have worked for several years before having the children but it was so long ago now that she can’t remember whether or not she contributed to a pension fund.

There is little reason for this couple to discuss or question what their retirement income might be because the issue is simply not on their radar and as a society we generally we tend to be neglectful of these matters until they take on a sense of urgency.

If Mr and Mrs X separate they could have a very hazy picture of the totality and quality of their assets. At Jones Myers we support our clients via a collaborative, holistic approach, bringing in pension and investment professionals when required. Doing so enables both Mr and Mrs X to each make informed and fair decisions that may involve, for example, trading a share of a pension for a cash sum.

The implications of dividing assets is extremely personal and will depend on how each party envisages their life going forward beyond divorce.

Retirement age is not a fixed point in the sand these days and we are all encouraged to think about working for a little longer.

Our firm and its experts strive to give couples the breadth and depth of advice they need to look beyond separation and divorce in order to build a new and different life of their choosing.

For some this could bring immediate retirement and the next stage of their life’s journey. For others it may entail working a little longer and paying into that pension fund in the full knowledge of what it will provide.

Contact us with your views by leaving a comment below follow us on Twitter @HelpwithDivorce – or call us at our Leeds office on 0113 246 0055 or our London office on 0203 617 8746.