Rising levels of later-life divorce are reshaping retirement plans for thousands of older Britons with new research showing that more than 200,000 people over 50 have been forced to delay stopping work as a direct result of separating from a partner.
The study, published by Legal & General to coincide with “Divorce Day” on 5 January, finds that one in seven people who divorce after 50 (15%) postpone retirement because of the financial shock of separation. Later-life divorce now accounts for 17% of all UK divorces.
The financial consequences can be immediate. Those divorcing after 50 report an average fall in income of £7,753 in the year following their split.
Nearly a quarter (24%) say rebuilding savings is harder because they are already past peak earning years, while 13% – almost 181,000 people – believe they will never fully recover financially.
HOUSING DECISIONS
The impact extends into retirement plans and housing decisions. Almost a quarter (23%) expect to live on a lower income in retirement than planned, and nearly a third (32%) anticipate having to downsize.
One in five (20%) now doubt they will be able to leave an inheritance, while 17% fear they will struggle to provide financial help to adult children.
Lorna Shah, MD Retail Retirement at Legal & General, says: “Retirement incomes are being stretched further than ever as people live longer and often enter retirement without sufficient savings. A divorce can make this challenge more complex.
“Our research shows that separating later in life can influence both immediate finances and longer-term plans.
“With less time to rebuild savings, many people adjust their expectations: delaying retirement, downsizing their home, or accepting a smaller income than they’d planned for.”
POSITIVE STEPS
But she adds: “However, there are positive steps people can take to protect their financial future.
“Pensions are often one of the most valuable assets a couple has and should be considered in the same way as the family home during a separation.
“Only 8% of people who divorced after 50 sought advice on this, yet expert guidance can help ensure decisions are balanced and that both partners understand the long-term implications. Taking advice early can make a significant difference to achieving a fair financial outcome.”
PRESSURE POINT
Adrian Moloney, Group Intermediary Director at OSB Group, says: “Behind the ‘Divorce Day’ headlines, the biggest pressure point for many separating couples is housing. Research from Legal & General last year shows around 280,000 divorces have been delayed in recent years due to financial pressures, with the cost of setting up two households playing a part.
“For those who do separate, the family home is typically at the centre of the decision-making process. Legal & General data also shows that around one in ten couples over 50 use property wealth – through a sale or equity release – to fund the cost of divorce.
“However, the long-term impact is severe: almost a quarter of those surveyed this year (24%) struggle to rebuild savings after a late-life split, with 180,000 divorcees (13%) saying they will never financially recover.”
REDUCED BORROWING POWER
And he adds: “At the same time, income often falls sharply after separation. Nearly a third (31%) of people who divorce after 50 give up rights to their partner’s pension, but only 8% consult a financial adviser first.
“This can significantly reduce borrowing power and limit housing options for at least one party. That makes access to flexible lending and good broker advice critical.
“As affordability slowly improves and rates stabilise, lenders and brokers have an important role to play in helping people navigate separation without losing access to secure housing, by offering solutions that reflect real-world complexity, not just headline rates.”
