A new study by Prudential into the impact of divorce on retirement income has found that retirees who have gone through a divorce will generally have a lower income than those who have never divorced, and are also more likely to be in debt.

Lower Income and Higher Debt

The study found that divorcees who plan to retire this year expect an average annual retirement income of £16,300, while those who have never suffered a marriage break-up are expecting to receive around £19,400 on average. This equates to around 16% more.

In addition, around one in three people who have been divorced expect to retire with debts (32% cent), compared with just one in five (21%) of those who have not been divorced. 

Those who have been divorced are also more likely to have retirement incomes below the annual minimum income standard for single pensioners set by the Joseph Rowntree Foundation (JRF). Around one in five who have been divorced (21%) expect to have incomes lower than the JRF’s benchmark of £186.76 a week, or £9,712 a year, compared with 13% of those who have never been divorced.

Devastating Financial Impact

“The financial impact of divorce can be devastating both in the short and longer-term, lasting well into retirement as divorcees experience expected retirement incomes of as much as 16% lower than those who’ve never divorced,” commented Clare Moffat. “Deciding on living costs and childcare at the point of divorce is difficult enough, but a pension fund is likely to be one of the most complicated assets a couple will have to split in the event of a divorce.” 

“Retirees who divorced a while ago may want to consider seeking updated professional financial advice on any post-retirement plans they have made, particularly in the light of recent changes to pension legislation,” she added. “There are also important differences in divorce law between Scotland, and England and Wales. Legal advice in the early stages of separation is therefore crucial.”

Divorce Numbers Rise for Older Women

The latest divorce statistics from the Office of National Statistics, which relate to the year 2014, show that there was a fall of 3.1% in overall divorce rate in 2014 compared to the previous year, but one demographic group experienced an increase in divorce numbers – women aged 55 and over.

In fact, this was the only age group to see an increase. For men, divorce rates have declined in all age groups; for women, rates have declined for those aged under 55 but increased by 1.9% for ages 55 to 59 and remained unchanged for ages 60 and over.

Prudential highlights that a large proportion of these women will be planning their retirement or will already be retired. It describes the increase of divorces in this group as particularly worrying, because women already tend to have lower retirement incomes than men on average, and so might feel the financial impact of divorce even more strongly.

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