Why joining the ranks of the ‘silver splitters’ raises all kinds of risks for your finances - Sarah Coles

Divorces hitting later in life owe much to the fact that we’re taking our time before we get married. In 2021, 84% of people aged 25-29 hadn’t tied the knot, and 59% of those aged 30-34 hadn’t either. Changing attitudes mean it’s much more usual to live together before getting married, and because we get divorced an average of around 12 years after getting wed, the later we walk down the aisle, the later we’ll be calling it a day.

Unfortunately, joining the ranks of the ‘silver splitters’ raises all kinds of risks for your finances. Our research shows that the longer you’re together, the more likely you are to have combined your finances. This sometimes happens at marriage; it’s also fairly common when couples have children and one person sees their income drop; and sometimes couples opt for joint finances at retirement – especially if one of them has a more generous pension than the other. If you’ve brought absolutely all your income and savings together, your spouse leaving out of the blue can leave you with no money of your own to fall back on. It makes it far harder to get through this difficult and expensive process in one piece financially.

Divorce always means dividing your assets, and doing so later in life means you tend to have more to lose, because you’ve spent far longer building savings, investments, and a stake in a property. If you’re into your 50s, 60s, or 70s, you may have received any inheritance you were expecting too, and there’s every chance you will lose a proportion of it. Inheritances are considered to belong to both of you – and sometimes a court will even postpone a hearing if a sizeable inheritance is imminent.

It means it’s worth getting good advice to make sure you appreciate the full value of all your assets, which can mean speaking to a financial adviser as well as a lawyer. Part of this process is ensuring you have a decent valuation of any pensions, so you can divide things fairly.

In recent HL research, over one quarter (27%) of people said they couldn’t cope in retirement without their partner’s income, with women likely to be more affected by men, so it requires an awful lot of thought. Splitting retirement savings can be a complex business. There are broadly three options, and they all come with their benefits and drawbacks.

The first is pension offsetting, where one person keeps all of it, and trades it off against other assets held by either or both of you. This approach has the advantage of being a relatively straightforward way to make a clean break, and if one of you is very keen to stay in the family home, it’s a way of making that happen. However, if you opt for this, whoever trades away their pension will need to rebuild from a standing start, and when you’re that bit older, there’s less time to do so. Now that the cost of bills has rocketed, you also face the burden of running the property on your own, which may leave you with less than you need to put aside for retirement.

The second option is pension sharing, where any pot is split into two. It can be a sensible approach, because it’s a way of getting a clean break, and it ensures neither of you is starting from scratch. However, this is relatively complicated, it requires a sharing order from the court, and it leaves both of you having to rebuild your pots.

The third approach is a pension attachment order (which is known as earmarking in Scotland) – where the person holding the retirement savings pays an income or lump sum to the other member of the couple when they start taking an income. This has the advantage of being less complex than some of the other options. However, it’s not a clean break, and it still needs to be ordered by the court, which comes at a cost.

There are some fundamental problems with attachment orders too, including the fact that all the tax is paid by the person taking the income - even when they have to give some of it to their ex. In addition, the person who doesn’t hold the pot needs to be aware that they have no control over when they receive the benefits – so their ex can delay taking it – plus, of course, they’ll lose that income when their ex passes away.

All of these things will deplete your retirement savings, and when you’re divorcing later in life, you’re likely to have less time in which to rebuild. To add insult to injury, the process itself can be horrendously expensive when there are so many finances to untangle, which leaves you with even more of a mountain to climb to get back on a stable footing. It means you need to think about everything from restocking your emergency savings safety net to rebuilding your retirement savings as a priority as soon as the papers are signed.

There are plenty of mildly unhappy couples staying together because they can’t face all the expense and upheaval of a split – or the ongoing battle to live on just one income when it’s finalised. The question then becomes whether you want to grow old with someone you’re increasingly struggling to live with, or whether joining the ranks of silver splitters is the lesser of two evils.

Property sales plummet

It emerged this week that the property market had its slowest start to the year in a decade. Non-seasonally adjusted figures revealed sales fell 27% in a month and 7% in a year, to just 77,390 in January. It reveals just how serious the impact of the mini-Budget was on the market.

Buyers packed up and headed for the hills as mortgage rates spiked, and while there’s some speculation that falling rates could tempt some of them back, the heady days of the peak -where at one stage we saw more than 214,000 transactions in a month, are well and truly behind us.

As recently as January, the Royal Institution of Chartered surveyors found that buyer demand was still dropping, so even if that picks up in the next few weeks, it’s going to take more than three months for this to feed through into completion figures. It means we can expect dismal news on property sales at least until the spring – and possibly beyond.

Sarah Coles is Head of Personal Finance and podcast host for Switch Your Money on Hargreaves Lansdown