Are pension reforms to fund silver divorces hype’?

By Norman Taylor, collaborative family lawyer

This April will see changes to the pension reform, which will make it easier and cheaper for people to withdraw money directly from their pension pots and remove the need to buy an annuity.

Whilst debate has raged regarding the various financial impacts this decision could have on retirees, one potential consequence in particular has grabbed the media’s attention – namely the effect this change could have on divorce rates in the over 60’s.

Headlines have predicted a rush of “silver splitter” divorces as disgruntled wives cash in this unexpected windfall and leave their ageing husbands.

But is this really a likely outcome? Well it is certainly an interesting scenario, but one which is unlikely to be as impactful as predicted.

We know that in recent years divorce rates among retired couples have increased – due to a variety of social and physical factors, including financial. What we don’t yet know is what proportion of the population has a substantial pension – or whether having access to this will impact materially upon the decision to divorce or not.

Pension sharing powers are already regularly used, so this is hardly a revolutionary change. The suggestion is that the pension pot will become just another cash asset – but there will be tax consequences to accessing the funds, which will eat into the available provision – and once the money’s gone, it’s gone.

Divorce rates in the over 60’s are increasing – this is a fact, but the reason behind this increase is somewhat less headline grabbing. Figures from the Office for National Statistics found that the increased divorce rate amongst the ‘silver’ age group is more likely to be because life expectancy has risen and people decide that living with the same person for potentially 60/70 years is a bridge too far.

In certain circumstances, I am sure that access to a significant sum of money may be a contributing factor in the decision to part, with people emboldened not to “grin and bear it” knowing that they would have a cash fund in old age on top of their state pension. However, contrary to the recent headlines, I do not envisage that the forthcoming pension reforms in themselves will precipitate a sudden rush of retirees to the divorce courts.

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