People who have previously divorced may be as much as £2,600 a year worse off than their married friends when they retire, new research suggests.
According to the findings, from financial services firm Prudential, divorcees are likely to retire with higher levels of debt, smaller pension funds and fewer savings than people who are still happily married.
Twenty-two per cent of divorcees retire with credit cards and other debts still to pay off, compared to 16 per cent of those still married.
The division of pension funds and other marital assets on divorce is a major contributor to these differences the company claims.
Prudential Technical Manager Clare Moffat said: “Divorce can be emotionally and financially draining as the retirement income gap for divorcees demonstrates. Whether it is due to the financial implications of splitting existing pensions, the cost of setting up a new home, or legal fees, divorce clearly has a major impact on the retirement plans of many people.”
She added:
“Around two in five marriages end in divorce and it is most common among couples aged 40 to 44 – the time of their lives when they would expect their earnings and their ability to save for retirement to peak.”
Women are less likely than men to have significant savings in later life, she continued.
“’Women’s retirement incomes are particularly vulnerable to the financial effects of divorce. Many of them may be relying on their husband’s pension and in some couples the wife may have had little input to the financial decisions that have been made over the years. For those divorcing or dissolving a civil partnership, a pension fund is likely to be one of the largest and most complex joint assets to be split.”
