The Financial Reality Facing Women on Divorce

Contrary to the narrative that men do particularly badly on divorce, recent research evidence has demonstrated the financial precarity facing women, particularly mothers and female domestic abuse survivors at the point of divorce.

The ‘Fair Shares’ study, the first nationally representative research examining the financial arrangements of divorcing couples in England and Wales, confirmed other economic data which showed that wives were more likely to be in a more vulnerable financial position at the point of divorce. The position was particularly precarious for mothers; for example, among women in paid work, mothers were far more likely than working women without children to have a net monthly take home pay of less than £1,000.

Pension wealth is particularly important on divorce, but the study shows that it is regularly overlooked. Whilst the law allows for one spouse’s rights to their pension to be allocated to the other on divorce, potentially making up for the other having lost out due to caring responsibilities, a worrying issue coming through from the data was the low value of women’s pension pots and the lack of awareness, understanding or interest in pensions amongst many divorcees.

First, women had accumulated poorer pension provision. Although women were as likely as men to have a pension, men were more likely to have paid into it for longer, and their pensions were worth more on average than those of women. For example, among men with pension pots, 13% had a pot worth at least £300,000 compared to only 2% of women.

Secondly, over a third of divorcees with a pension not yet in payment did not know the value of their own (let alone their ex-spouse’s) pension pot, with women more likely than men to say that they did not know. In addition, nearly a quarter of those with an employer pension did not know what kind of pension scheme they were enrolled in, whether defined benefit or defined contribution.

This lack of awareness and understanding of pensions fed through into how, if at all, pensions were taken into account when couples sought to make their financial arrangements. Only 11% of couples yet to retire had made a pension sharing arrangement. Where a pension was shared, there was an equal split of the pension in only 22% of cases.  The prevailing view appeared to be that pensions are entitlements of the individual concerned, and generally to be preserved by that person, rather than ‘marital assets’ available to be shared.

Overall, this highlights a particular financial vulnerability for women. Their lower value pension pots are likely to impact on their financial security in retirement, particularly if they took the main responsibility for childcare post-divorce and are unable to make reasonable contributions to a pension scheme over the coming years.

This financial position is exacerbated for female survivors of domestic abuse, with the findings showing that, on average, they often had fewer assets to divide than other female divorcees, with the matrimonial home less likely to be owner-occupied and female survivors being less likely than other women to have their own pension.

Female survivors were also less likely than other divorcing women to have been working at the point at which they separated, and – if working – less likely to have been working full-time. Among women who were working during the marriage, survivors were earning less on average than other women, with nearly twice as many survivors as other female divorcees earning under £1,000 per month after tax.

Taken together, these findings demonstrate the particular financial risk that this group of divorcees face when getting divorced compared with other female divorcees, with potentially less capacity to support themselves financially after divorce, particularly given that domestic abuse was more common among women with dependent-age children (61% of survivors compared to 52% of other female divorcees), with the added financial burdens and constraints that childcare brings. By contrast, the situations of male survivors of domestic abuse were less different from other men, although they had higher levels of gross debt.

The Law Commission has recently published its scoping review of the law of financial and property matters on divorce, concluding that the law needs reform and outlining four potential models for reform. In light of our findings, we suggest that not only do the needs of those who are economically vulnerable need to be a central consideration in any reform of the law, but policymakers also need to focus on how to enable and encourage couples to take full account of all of their assets and their future prospects when deciding on what would be an appropriate outcome. In particular, greater consideration needs to be given to how pensions may more readily be factored into the arrangements that couples make, and how survivors of domestic abuse can be supported on divorce.