Divorce After 50: What Happens To Your Savings?

Divorce after 50, often referred to as "grey divorce," comes with a unique set of challenges that differ from those faced by younger couples going through a divorce.

One of these challenges is financial. Under UK law, when a marriage ends, couples are required to devise a plan for dividing assets such as pensions, property, savings, and investments.

Many of these decisions end up being resolved in court or can only be finalized with the approval of relevant financial institutions. Depending on the court’s ruling, your ex-spouse may be entitled to a portion of your pension, savings, and investments. This article explains pensions during a split and how divorce may impact your savings.

Savings Vs. Pension

Savings and pensions are not too different. A pension is a long-term saving account designed to be accessed later in life. On the other hand, savings refers to money you’ve set aside and accumulated over time in bank accounts. Both savings and pensions factor into the settlement process when you divorce after 50.

Pension 101

In the UK, citizens can benefit from state pensions when they turn 65. However, depending on the pension scheme’s rules, they can take money from their pension pots as early as 55. 

To this end, divorce after 50 means that your savings and pensions remain a factor as they would at any stage of the divorce. The only difference is that at this age, actual funds can be drawn sooner per court rulings and used as part of the divorce settlement process.

There are generally three ways in which the UK government deals with pensions after divorce: pension offsetting, pension attachment/earmarking, and pension sharing.

#1- Pension Sharing

A pension sharing order can only come into play after a court order. In this scenario, the court issues an order giving a percentage of one spouse’s pension pot to another. This ensures that both spouses have an equivalent standard of living after divorce. 

#2 – Pension Offsetting

Pension offsetting is another option when couples divorce after 50. Here, instead of directly dividing the pension pot, its value is considered alongside all other marital assets. One spouse gets to keep their entire pension, but the other spouse receives a more significant share of other assets, such as property or investments. 

#3 – Pension Attachment Or Earmarking

Pension attachment or earmarking is also an alternative for couples who divorce after 50. In this scenario, the court can designate a portion of the pension income to be paid to the ex-spouse. The responsibility to remit the payments is then left to the trustees or managers of the earmarked pension scheme.

Savings 101

Similar to other financial assets, savings are typically divided between spouses during a grey divorce. In this process, the court takes into account various factors, including:

  • The length of the marriage
  • Each person’s earning capacity
  • Financial needs
  • Age and health
  • Contributions made to the marriage
  • The quality of life during the marriage and the potential to sustain it afterward

The objective when dividing savings between spouses is to ensure a fair and equitable distribution. In this context, fairness does not necessarily mean an exact 50/50 split. For instance, a spouse might receive a larger portion of the savings if they have limited income prospects or if they sacrificed their career for the marriage.

On occasion, the court may allow couples to offset savings against other assets. Similar to pension offsetting, one party might retain more savings while the other receives a larger share of the pension or property. There is no definitive rule when it comes to dividing savings in divorce after 50.

How To Protect Your Savings After Grey Divorce

  1. Close any joint accounts or convert them to individual accounts to prevent the other party from draining them. 
  2. Monitor your credit reports to ensure your ex-spouse isn’t accruing debt in your name. 
  3. After the divorce, update your will and other estate planning documents to reflect your new relationship and life status.
  4. Review and adjust your retirement plan considering the impact of the divorce on your savings and pension.
  5. Put in place a post-divorce budget to help manage your savings and spending effectively.
  6. Seek legal advice from a solicitor experienced in divorce proceedings to help protect your financial interests.

Given the lack of a legal framework for distributing savings after divorce, you must take control of your finances before, during, and after the process.

Parting Shot

Given the complexity of savings and other investments when people divorce after 50, it’s essential to consult a financial advisor or a divorce lawyer who can guide you through the process and help protect your economic interests. The main goal, in this case, is to ensure that both parties are on an equal footing and neither has undue control over the other’s finances.

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