Researchers found that short-term thinking at time of divorce can leave some losing out on money from paid employment, occupational pension, access to a partner’s pension or home ownership.
Couples under emotional pressure often look towards a divided split of finances with an emphasis on the family home at the expense of pensions, which can affect finances and choices in later life, experts say.
Sense of choice
A lack of planning and advice can leave people with a reduced sense of choice decades after divorce, particularly for women on low pay, who may have taken time out for caring responsibilities or may not have a pension, the study found.
Researchers say the study could help guide targeted policy interventions that give people the time and support to make informed choices when separating.
The study is among the first to assess how divorce affects work and retirement later in life.
Family circumstances
A University of Edinburgh team assessed a dataset of 47 people aged over 50 from the UK who had experienced divorce or separation.
The participants – who were employed in the sectors of health care, transport and financial services – were surveyed and interviewed on employment history, health, family circumstances and unpaid caring responsibilities throughout their lifecourse.
In most cases the financial decision-making during divorce involved a trade-off between home and pension with the non-main earner retaining the home asset (generally the woman) and the highest earner retaining the pension asset (generally the man), the study showed
Several divorced care-givers described efforts to stay in the family home to maintain a sense of stability for children. It often took those who moved out of the family home a long time to own another home, if at all.
Reduced earnings
Some people had inadequate pension savings by the time they reached later working-life owing to career interruptions, reducing both earnings and pension growth.
Others were financially compelled to work for longer than they would otherwise have chosen, because their financial priority after divorce was their home – rather than a pension pot.
Some participants highlighted the strain of funding two households, mortgages, child maintenance and everyday living costs, during and after the divorce, but a pension from sustained full-time employment could ensure financial stability in the long-term, the researchers say.
Other factors which influenced outcomes from divorce were educational attainment, work history and income.
Researchers say increasing awareness of the value of household and individual assets could help couples assess the balance between home equity and retirement savings as life circumstances change.