Divorce can put individual finances under considerable pressure. Living two separate lives can cost much more than living together under one roof.
There may be substantial setup costs involved with buying or renting a second, separate home, furnishing the property, and buying duplicates of any essential items the children need to have in both places – for example, school uniforms, stationery and favourite toys.
As you move into the future, you are likely to have to pay your household utility bills single-handedly, as well as buying essentials like food and any luxuries as well.
Nobody should feel trapped in an unhappy marriage or civil partnership due to financial concerns – but it’s important to plan ahead to make sure you can maintain an enjoyable lifestyle not only after your separation, but as you move towards retirement too.
Research published in autumn 2018 by Age UK showed that married women typically have smaller private pension savings than their husband. This is when the pension trap can become a threat.
If this pension pot is not taken into account when calculating who gets what during the divorce, it can leave newly separated women with little to no pension savings, and nothing extra in the settlement to compensate them for this.
To prevent this from being the case, there are a few different ways to deal with retirement savings during and after a divorce.
One of the first and foremost things you can do is to negotiate amicable adjustments to the divorce settlement that account for any imbalance in each spouse’s pensions savings, and mediators are perfectly placed to help you resolve this through mutual agreement.
Depending on your age at divorce, it may be possible to release funding from your existing pensions pot, allowing this to be shared directly between both parties.
If you are not in a position to do this, alternatives can include agreeing a division of assets and other savings that account for the pensions savings of each individual.
Of course it is also possible that you hold roughly equivalent pension savings – in which case the division of money and assets might be largely unaffected by this.
Finally, it is essential to plan for the future. Divorce can leave you effectively starting over at a later age in life, with less time and opportunity remaining to save for retirement.
Mediation can help again by reducing the total cost of your divorce proceedings, striking an amicable agreement over the division of the family finances, and helping you to understand your economic position both now, as you set up your new home independently, and as you move towards your retirement years.
Are you considering a separation, but worrying about the financial difficulties which could result from it? Get in touch with us today for a confidential chat to discuss your options.