Can I Still Retire When I Planned If We Divorce Now?

You may have spent years planning your retirement. Perhaps you and your husband or wife had already agreed when you would stop working, where you would live and how you would spend your time.

Now you are considering divorce, and those plans suddenly feel uncertain.

 

Will you still be able to retire when you planned? Or will you need to work for several more years?

Divorce before retirement does not automatically mean postponing your plans. However, your financial circumstances are likely to change.

The important question is whether your retirement plans will still be affordable once you and your spouse have separate finances.

In this article, I look at:

• how divorce can affect your retirement plans;
• why pensions need careful consideration;
• what happens if one of you has a much larger pension;
• whether keeping the family home could affect your retirement;
• how to assess your future income and financial needs; and
• how financial mediation can help you explore your options.

You do not have to abandon your retirement plans before you understand what might be possible.

 

Why does divorce affect retirement plans?

When you plan your retirement as a couple, you usually make decisions based on your combined finances.

You may expect to receive two pensions. Perhaps you intend to sell the family home, downsize and use the remaining money to support your retirement.

You might also have planned for one of you to retire earlier while the other continued working.

Divorce can change all of those arrangements.

Instead of funding one household, your combined resources may now need to support two separate homes and two sets of living expenses.

Your pensions, savings, investments and property may also form part of your financial settlement.

That does not necessarily mean either of you will have to work longer. However, it does mean you need to reconsider the figures.

 

What happens to our pensions if we divorce before retirement?

Pensions can be among the most valuable assets in a divorce. In some cases, they may be worth more than the family home.

However, people often pay far more attention to their property than their pensions.

Perhaps you know exactly how much your house is worth but have only a rough idea of your respective retirement savings.

You may not even know how many pensions you have between you.

Before discussing a financial settlement, you will usually need to obtain information about both your pensions.

This includes workplace pensions, personal pensions and pensions from previous employment.

Your pension providers can supply valuations. However, the figure shown on a pension statement does not always tell you how much retirement income that pension could provide.

For example, a final salary or other defined benefit pension works differently from a pension that consists of an invested fund.

Two pensions showing similar values may provide very different benefits in retirement.

This is why pension information sometimes needs specialist interpretation.

You can read more about the different ways pensions may be dealt with in MoneyHelper’s guide to splitting pensions on divorce.

 

What if my spouse has a much larger pension than me?

This is a concern I frequently encounter in financial mediation.

In many long marriages, one person has built up a substantial pension while the other has a much smaller one.

Perhaps you reduced your working hours to raise your children. You may have taken a career break or supported your spouse’s career while managing the family home.

As retirement approaches, the difference between your pensions can become particularly significant.

However, the fact that a pension is in your spouse’s name does not necessarily mean it should be excluded from the financial arrangements.

Pensions are among the assets that can be considered when resolving the finances on divorce.

Depending on your circumstances, one option may be a pension sharing order. This allows an agreed or court-determined proportion of one person’s pension benefits to be allocated to the other.

Other arrangements may also be considered.

The important point is to understand what each of you may have available in retirement before deciding how to divide your assets.

 

Should we divide our pensions equally?

An equal division of pension values does not automatically produce equal retirement incomes.

Your ages, pension arrangements and intended retirement dates may all affect the outcome.

For example, you may have a final salary pension that provides a particular income for life. Your spouse may have a personal pension whose income depends on investment performance and how the money is withdrawn.

Comparing the two can be complicated.

Where pensions are significant or your circumstances are complex, it may be appropriate to obtain a report from a Pension on Divorce Expert (PODE).

A specialist can examine the pensions and, depending on the instructions, calculate what different arrangements could mean for your respective retirement incomes.

That information can help you explore the options in mediation and obtain informed legal and financial advice.

 

Can I keep the family home instead of taking a share of the pension?

You may feel particularly attached to the family home.

Perhaps you have lived there for decades. You know the neighbours, enjoy the area and had always expected to stay there after retirement.

When divorce becomes a possibility, keeping the property may feel like your biggest priority.

One possible financial arrangement involves one person retaining more of the property or other assets while the other retains more of their pension. This is known as pension offsetting.

However, a house and a pension are very different assets.

Your home provides somewhere to live. Your pension is designed to provide financial support in retirement.

Even if they appear to have similar values, they are not necessarily equivalent.

Before agreeing to keep the house in exchange for giving up a pension claim, consider whether you will have sufficient retirement income.

You may own your home outright but have very little money available for everyday expenses.

Alternatively, keeping the property might work well if you have sufficient independent retirement income and can afford its ongoing costs.

The answer depends on your individual circumstances.

Your future financial security matters just as much as where you will live.

 

How much income will I actually need when I retire?

This is one of the most useful questions to explore before making financial decisions.

Rather than beginning with the assumption that you must retire later, start by looking at what retirement might cost.

Your future budget could include:

• housing costs, including any mortgage or rent;
• council tax, utilities and household bills;
• food, transport and everyday living expenses;
• holidays, hobbies and other lifestyle costs;
• home maintenance and unexpected expenses; and
• any continuing financial responsibilities.

Consider which expenses might disappear when you stop working and which could increase.

You may no longer have commuting costs, for example, but you might spend more on heating, travel or leisure activities.

Once you understand your anticipated expenditure, you can compare it with your likely retirement income.

MoneyHelper has a free retirement budget calculator that may help you prepare your figures.

You do not need to have every answer immediately. The purpose of this exercise is to understand what you are working towards.

 

What about my State Pension?

Do not overlook your State Pension when reviewing your retirement plans.

It may provide an important part of your future income, particularly if you have a relatively small workplace or personal pension.

However, you should not automatically assume that you will receive the full State Pension or that it will start when you originally intended to retire.

Check your individual entitlement and State Pension age.

You can do this using the government’s State Pension forecast service.

Your forecast can help you understand how much you may receive, when you may receive it and whether there are opportunities to improve your entitlement.

Certain Additional State Pension benefits or protected payments may also be relevant when pensions are considered on divorce. The basic State Pension itself cannot be shared.

Where necessary, obtain the appropriate State Pension valuation and specialist advice.

 

What if I want to retire before my State Pension starts?

You may have planned to retire at 60, for example, but your State Pension might not begin until several years later.

That creates a period during which you will need another source of income.

Perhaps you expected to rely on your spouse’s earnings or pension during those years.

Following divorce, you will need to reconsider that arrangement.

Look carefully at when each pension becomes available, what income it could provide and whether you have sufficient savings to cover any gap.

It may be possible to explore different retirement dates or financial arrangements.

However, avoid making assumptions until you understand the actual figures.

 

Do our future financial needs matter when dividing our assets?

Absolutely.

For many people approaching retirement, future financial needs are central to discussions about their divorce settlement.

You may have limited opportunities to increase your retirement savings.

Your spouse might still have several years of earning capacity. Alternatively, one of you may have already retired while the other continues working.

You may also have different housing requirements, incomes, pension entitlements and financial responsibilities.

These differences deserve careful consideration.

In England and Wales, the court considers a range of factors when determining financial arrangements on divorce. These include age, income, earning capacity, financial resources, needs and responsibilities.

There is no automatic rule requiring every asset to be divided equally.

In mediation, we can use the financial information to explore how different proposals might affect your respective futures.

The question is not simply how much each of you receives. It is also what those assets and resources will allow each of you to do.

 

What if I have already started receiving my pension?

If either of you has already retired or started drawing pension benefits, it is particularly important to establish exactly what has happened.

Pensions that are already being paid can still be relevant to financial arrangements. However, the options and financial consequences may differ.

For example, one of you may already have taken a tax-free lump sum or purchased an annuity.

These decisions can affect the available options.

Where necessary, obtain advice from a pension specialist before agreeing how the pensions should be treated.

 

Could I still retire at the age I originally planned?

Possibly. However, the answer will depend on the financial arrangements you ultimately make.

You might discover that your existing retirement plan remains achievable.

Alternatively, you may need to make adjustments.

These could involve changing your intended retirement date, reconsidering your housing arrangements or reviewing how you use your available assets.

The important point is to understand your options before making decisions that may be difficult to reverse.

You may also benefit from independent financial advice. A suitably qualified financial adviser can help you examine retirement income projections and assess the implications of different choices.

 

How can financial mediation help with retirement planning?

Financial mediation provides a structured process for discussing your finances and exploring possible arrangements.

It begins with financial disclosure.

You both provide information about your income, property, pensions, savings, investments, liabilities and other relevant financial circumstances.  Read more about financial disclosure in my article on whether financial disclosure is necessary in an amicable divorce.

Once you have established the financial picture and addressed any gaps, you can begin considering your respective future needs.

This may include exploring:

• when each of you hopes to retire;
• what income you may need;
• how different pension arrangements might affect you;
• whether you can afford your proposed housing arrangements; and
• how different financial proposals could work in practice.

Where necessary, we can identify questions that need input from a pension specialist, financial adviser or solicitor.

As your mediator, I remain impartial. I do not tell either of you what financial settlement to accept or provide individual legal or regulated financial advice.

Instead, I help you work through the information, consider your options and explore arrangements that may meet your respective needs.

You can find out more about my financial mediation service.

 

Should we obtain legal advice before finalising our divorce?

Yes, independent legal advice is particularly important when pensions and retirement are involved.

Your solicitor can explain your legal position and advise you about the implications of any proposed settlement.

A financial agreement reached through mediation is not automatically legally binding.

If you reach an agreement, you will normally need an appropriate court-approved consent order to make your financial arrangements legally binding.

You should also obtain advice about the timing of your divorce’s Final Order. Obtaining it before resolving the finances can have important consequences, particularly for pensions.

You can read more in the government’s guidance on financial consent orders.

 

Frequently asked questions

 

Will I have to work longer if I divorce in my 50s or 60s?

 

Not necessarily. Divorce can affect your retirement finances, but it does not automatically mean postponing retirement. Your future housing costs, pension entitlements, other assets and financial settlement will all influence what is affordable.

 

Can my spouse claim part of a pension I built up before our marriage?

 

Pensions built up before marriage may still need to be considered when resolving your finances. Their treatment depends on your circumstances, including the available assets and both parties’ financial needs. Obtain independent legal advice rather than assuming they will automatically be included or excluded.

 

What if we cannot agree how to divide our pensions?

 

You may be able to explore different options through mediation, supported by specialist pension information. If you cannot reach an agreement, you can obtain legal advice about the available alternatives, including asking the court to determine the financial arrangements.

 

Your retirement plans deserve careful consideration

Divorce later in life can feel particularly unsettling.

You may have worked towards retirement for decades. The possibility that those plans might change can make an already difficult decision feel even more overwhelming.

However, you do not need to assume that your planned retirement is no longer possible.

The first step is to understand your financial position, your future needs and the options available.

Taking the time to consider those matters now can help you avoid decisions that may affect your financial security for many years.

If you are considering divorce and worried about what it might mean for your retirement, financial mediation may help you explore your options before making important decisions.

At Divorce Nicely, I help separating couples work through financial disclosure, identify their respective needs and consider practical arrangements for their future.

All my mediation meetings take place online.

You can start by arranging an individual, confidential MIAM. This gives you the opportunity to discuss your circumstances privately, understand how financial mediation works and consider whether it may be suitable for you.