Recent studies suggest that women see their household income decrease by 41%, compared to 21% for men in the year after a divorce. The report from Legal & General suggests that women are likely to experience a significant decline in household income in the first year after their divorce, decreasing by an estimated 41%.
The large disparity between men and women relates to several factors, one being that men are often the main income earners in the family (70% compared to 21% of women) and typically earn more money. This imbalance creates a major challenge when couples separate their finances and fund two separate households.
The Legal & General report states that 24% of women financially struggle after a divorce, compared to 18% of their men, resulting in escalated financial concerns and worries. The research indicates that while women often agree to the division of finances at the point of divorce, many may be signing over their rights to a critical financial asset.
Despite the financial pressures, women are significantly more likely to ignore their rights to a partner’s pension within the separation agreement (30% for women, compared to 17% for men). These figures are concerning regarding the ability of a woman experiencing a divorce to be able to fund their retirement due to a large gap in pension wealth at the stage of divorce.
Based on figures from Legal & General, women saved an average of £23,000 in their pension pot at the point of divorce, compared to £60,000 for men.
Katharine Photiou, MD of Workplace Savings of Legal & General Retail, explains that their research indicates that women take a significant financial hit when experiencing a divorce. Women are impacted by the change in household income, and their long-term finances are at risk, as pensions are often not considered when splitting marital finances. Photoiou explains that moving from years of mutual financial planning and balancing costs to a single-income household can leave both sides, particularly women, with economic concerns. Women are also more likely to not pursue their rights to a portion of their partner’s pension, which could result in minimal resources for retirement. While women typically take on a significant amount of family responsibility throughout marriage, this can be at the expense of their ability to work and create their pension pots.
If possible, divorcing couples should get the support and consultation of a legal and financial adviser who can ensure the divorce process is fair, leaving both sides with the best possible financial situation available to start the new stage of their lives. If you are concerned about the income gap on divorce come and see one of our experienced solicitors for an initial consultation charged at a discounted rate.
