Pension Planning - Silver Divorce - The Last Taboo?

DairyQueen

A tale of our times....

Three years ago Sam's marriage ended. She was then 64, married for 44 years, three adult children and five grandchildren. Three years ago Sam shared a 4-bed detached with her 66-year-old DH, and they lived comfortably on their SPs and his FS pension. Three years ago Sam's was a two-car household; they travelled abroad a couple of times each year; they enjoyed hobbies and frequently socialised with friends. Sam and DH were happily married and contentedly retired.

That's what we all thought.

Sam is now separated and lives with her daughter. A pension income which comfortably supported a couple in one household won't stretch to more than the basics for two homes. The capital which funded one decent-sized, village home is insufficient to purchase a couple of small flats on the wrong side of the urban tracks.

Sam and her ex are not the only such couple I know.

Anyone reading this may think I am considering trading-in Mr DQ (or he, me). Err.... that's not the plan as he is too busy to have noticed that Angelina Jolie is now unattached. Even so, Sam's experience has triggered a previously unexplored line of thinking. Am I the only person who has asked myself the 'other' spousal pension planning question? We have the widow/er issues covered but, BUT... what happens if we divorce?

It seems the majority of couples approach pension planning with lifelong togetherness as a given, but the stats suggest that we 50/60-somethings are bucking the trend, and our divorce rates are rising.

Is anyone here willing/able to share their experiences of 'silver divorce'? What pension plans did you make which proved especially problematic? What would you change with the benefit of hindsight? Would you have taken early retirement (and, possibly, a reduced pension income), if you had known that you would be referring to your OH as your ex? What are the complications of sharing pensions in payment? Etc.

I am not being pessimistic (honest guv) but nothing in this world is guaranteed except death and taxes. If Angelina discovers a yen for balding 60-year-olds I need to be prepared.

badmemory

Nothing to offer here but sympathy. I was caught in a divorce before pension sharing and after having fallen for the "my pension is more than enough for both of us" line. I was lucky in that, without maintenance for our child for most of the time, I was under 50 (just) and managed to cope but I dread to think what would have happened had I been older.

The good part may be that death may be guaranteed but there will probably be very few taxes!

I think what is happening is that some couples are living what are essentially separate busy lives, and when retirement hits they are stuck spending 24 hours a day with someone they have probably spent very few hours a week with (whilst awake) and realised they don't really even like or even worse respect one another any more. Whilst people used to say you're a long time dead, perhaps they should now be saying you're a long time retired. What was once 5 years could now be 30 and that could be a long time to be unhappy.

Thrugelmir

Take comfort that they are both far better off than the majority of people who divorce throughout their lives. Houses, cars, holidays etc don't equate to happiness either. My divorce was some years ago. Never regretted changing to a simpler less materialistic lifestyle.

DairyQueen

badmemory wrote: »

Whilst people used to say you're a long time dead, perhaps they should now be saying you're a long time retired.

Totally agree. Many people will spend as many years retired as they did working.

You make some valid points about the causes of silver divorce (very sorry to hear about your experience btw) but I speculate that plenty amongst our age cohort still approach retirement without considering that their decades-long relationship could end this way. It used to be that those who managed to make it to retirement with relationship intact could pretty much guarantee that their marriage would only end with the death of self/spouse. However, the stats suggest that the social changes in our lifetime will mean that silver divorce becomes commonplace.

Sam's situation was typical of many of my friends who are now in their mid/late 60s as her, and ex's, comfortable retirement depended on shared expenses and income (a big chunk of which was provided by his generous FS pension). Younger age groups have benefited from changes in society's attitude toward gender, and over the next decades fewer and fewer people (women?) will retire dependent on their spouse's pension. Also, younger age groups will not be the beneficiaries of FS schemes. Couples will be more equal providers of household income both before, and after, retirement, and their pension income will derive from several, flexible sources. The 'all eggs in one (male) basket' pension will be history.

This is good news but a more equally divided/provided pension pot isn't necessarily a BIGGER pension pot. The problem for many (most?) of those who sadly find themselves divorcing in later life will still be the issues that Sam and her ex face: how do they fund the purchase of two homes from capital intended to provide one?, and meet the expenses of independent rather than shared lives? Divorce is a blow at any age but those in their 50s/60s have less/zero time to take action to address the financial consequences, let alone re-rengineer the rest of their lives. For example, with hindsight, Sam wishes they had never downsized, nor moved away from their home town, after retiring.

Mr DQ is 60 next year, and I am in my late 50s. We are in the late stages of planning our retirement. Friend Sam's experience has shaken me and DH from our complacency. We have decided that divorce is one of those uncomfy possibilities - like dementia and nursing care - that we are best served by discussing rather than ignoring. Nasties don't always happen to 'the other guy' and we have added another 'what if' to the retirement planning spreadsheet. Problem is that there is so little info available to guide us. Thus I have turned to this forum for ideas/thoughts on what we should consider.

Examples: How do DB schemes/courts handle divorce for pensions in payment? What happens to divorcees under nSP rules? Would we be best served separating, rather than divorcing, if push-comes-to-shove? What about inheritance? How do you compensate your spouse for the loss of their widow/er benefits? and on, and on.

Despite the stats, this seems to be one of those social issues which has barely touched the mainstream media. There is hardly any info out there and those whom have endured the experience seem, understandably, reluctant to share. Thanks @badmemory for being amongst the brave.

PennyForThem_2

Although there was an implication that widow/widowers are 'catered for' I think they should be considered under this scenario too.

Often the pension (dc or other) is halved and may not have an inflation protection component, which means in real terms the pension falls. If the remaining partner has no alternative own pension or other financial fallback then they are in a similar position to the divorced.

As I understood it divorced partners can depend on a partner's pension depending on the circumstances of the marriage - or am I wrong on this?

DairyQueen

Thrugelmir wrote: »

Houses, cars, holidays etc don't equate to happiness either. My divorce was some years ago. Never regretted changing to a simpler less materialistic lifestyle.

I'm also of your school of thought: better to live modestly and happily alone than miserably in material comfort. Apologies, my post wasn't that well constructed as my concern isn't about material comfort so much as financial survival, and how to plan contingency against the possibility that your beloved may become your ex-beloved in your dotage. DH and I both still believe we each grabbed ourselves a bargain but he may spot a better offer amongst the pensioner discounts one day, or I may decide that his idiosyncrasies trigger homicidal tendencies, rather than laughter, when witnessed 24/7.

The couple I mention are in a tough position: the proceeds of the marital home are insufficient to buy two, small homes adequate for their current needs. The pension income is only sufficient to fund basic expenses - utilities, food, clothing - for two lifestyles. The husband has health problems so paid employment isn't an option for him (pushing 70). The wife (late 60s) has been retired for a decade and her daughter's home is in an isolated, rural location where employment opportunities are rarer than hen's teeth.

You get the picture.

The couple planned the usual contingencies - their total assets/income were sufficient to support the widowed survivor of their marriage with equity released from the marital home as the back-up. It simply never occurred to either that a marriage of such duration could end the way it has. The financial consequences have been dire. I feel desperately sorry for them both and realise that if it can happen to them, after four decades together, then it can happen to anyone.

DH and I are fortunate that we have (independent) pension pots which are sufficient to support two small, reasonable homes, and modest-with-treats lifestyles, at the moment. However, optimising our finances in retirement could be a big risk if we split. Having spent our lives saving for retirement we are on the cusp of beginning spending it. In a decade, if all goes to plan, we will have enjoyed making a big dent in our savings. When the first of us dies the survivor will have the benefit of our joint assets and widow/er's pensions. We have a plan if either of us needs nursing care. The divorce-thing is the elephant in the room.

Like friend Sam, it simply never occurred to us (or any other couple we know of our vintage) to plan against such a contingency - until now. As far as we know we are still the only couple who acknowledge the possibility. Either all our friends are complacent, or are in denial, despite the experiences of friend Sam (and others). Our lives, longevity and expectations are very different from those of our parents. Aged 30 I had no illusions that my relationship may not last 25 years. Whose to say that, aged 60, it will last the rest of my life?

AlanP_2

I'm not saying you don't have a valid point and legitimate concerns but I am at a loss to think of what you could do to negate the risk TBH.

Live a totally frugal lifestyle "Just In Case"?

Buy the 2 smaller properties now "Just In Case"?

On a practical, human nature level I can understand the reluctance to discuss the possibility within a relationship. Death comes to all, needing Care comes to a good few and both are essentially "outside our control" so realistic to discuss & plan for them.

Divorce is another matter - that is a choice based situation, the consequences of which are a topic many couples would be reluctant to consider particularly financial considerations.

Particularly true of those of us of say 50+ for whom the idea of a Pre-Nuptial Agreement was an alien concept as we (typically) hadn't built up many assets we needed to protect when we got married.

I know we hadn't and when my bride to be said "With all my worldly goods I thee endow" I was no better off than when I entered the church :rotfl:

missbiggles1

I'm the same age as "Sam" and never expected to rely on my husband's pension and neither did anybody I know. The women I know have their own pensions, paid for out of their own earnings.

mgdavid

missbiggles1 wrote: »

I'm the same age as "Sam" and never expected to rely on my husband's pension and neither did anybody I know. The women I know have their own pensions, paid for out of their own earnings.

Statistically I believe you (and your acquaintances) are unusual, at least in having a significant pension.

bigadaj

To be fair the issue of balancing pensions or at least post retirement income does come up frequently on these boards.

Many are advised to balance pensions where possible and appropriate, the use of one spouses full personal allowance in retirement is a good incentives even where higher rate tax relief is available to the other spouse.

It's a useful consideration in most people's retirement planning, as well as early death of one partner, the balance of current to future spending etc

DairyQueen

PennyForThem wrote: »

Although there was an implication that widow/widowers are 'catered for' I think they should be considered under this scenario too.

Often the pension (dc or other) is halved and may not have an inflation protection component, which means in real terms the pension falls. If the remaining partner has no alternative own pension or other financial fallback then they are in a similar position to the divorced.

As I understood it divorced partners can depend on a partner's pension depending on the circumstances of the marriage - or am I wrong on this?

Very pleased to include the 'widowed' scenario within the scope. As you say, the household income invariably drops on the first death and people may not consider the impact of this, or (lack of) indexation, or inflation, on the survivor. However, I suspect there are big differences between widowhood and later-life divorce (my aim is to become better informed).

Widowhood - especially amongst older age groups - is socially 'visible' and is usually considered by those who make any financial and/or retirement plans. Regardless of the size of a couple's joint assets, it's common for people to ensure that their partner will have the benefit of all of the couple's assets (or as much as they need) throughout the survivor's lifetime. The same is not true for those who divorce. On divorce, the assets will be split and each party will only receive the benefit from a reduced share of the couple's total assets for the remainder of their lives.

Divorce post-retirement is still considered a rare phenomenon and is ignored within retirement planning. It's one of those invisible, uncomfortable subjects although, if it happens, the outcome can be dire.

The widowed will benefit from a widow/er's pension (be it at 50% for annuities or DB schemes) but widow's pensions seem only to be paid to the survivor of those legally-bound. Once divorced you won't receive 50% of your late ex's pension, you will receive zero. The cost of replacing lost pension benefits, and/or providing income for those previously dependent on a former spouse's pension, is pretty chunky. Only those with substantial assets could hope to meet the cost.

I don't know much about pensions-in-payment and divorce but it seems to be a problematic area as DB schemes don't seem to have any mechanism to split a pension-in-payment. I believe that you are correct that divorce settlements may ear-mark pension income to a former spouse but this will probably cease payment on the death of the scheme member. 'Widow' seems to be specifically defined as the legal partner of the deceased scheme member - ex spouses don't qualify.

Sadly, Sam (referred to in my initial post) is an example of the problems specific to those who split in later life. As terrible as it sounds, financially she (or ex) would have been ok if widowed. S/he would still be in the marital home. S/he would have the benefit of the entire value of the assets the couple built over a lifetime together. She would have the 50% widow's pension (paid for life), plus her SP. Both would have the option of equity release, or downsizing the marital home. These are the plans the couple made to protect the survivor. I suspect that, on retirement, the possibility of splitting would have been so far-fetched that it would have been laughable.

Sam cannot divorce without losing the right to widow's pensions so she and ex remain bound for financial reasons. There is insufficient capital for ex to 'buy her out' of his pension benefits. They have sold their marital home but the proceeds are insufficient to house them separately in anything more than the most basic of homes. This applies even if they didn't need the cash to supplement their income. Assets and income which adequately supports a couple in one household won't stretch to cover all the needs of two households in this instance. That's the conundrum of divorce at any age but working age divorcees have options to plug the income gap, and time to rebuild capital.

I don't want to appear paranoid but, not so long ago, redundancy was as rare as late-life divorce. Look what has happened in the workplace in recent decades. I don't have a crystal ball but silver divorce seems to be one of those social changes which will gather pace for many reasons and, as usual, there will be many casualties before our institutions and laws catch-up. In the meantime we can hope for the best, but it may be worthwhile to plan a little contingency against the worst.