3 important reasons for women to keep saving for retirement during and after divorce

The financial effects of divorce often continue after the legal part is over. Here are three reasons for women to prioritise retirement savings when divorcing.

The process of getting divorced is not just an emotional one, but a financial one too. We all know that divorce is expensive, but many people underestimate the ongoing financial ramifications of separating from a spouse or civil partner.

What’s more, there are significant financial inequalities between men and women that are often exacerbated by divorce. For instance, a 2024 report from Legal & General found that on average, men see a 21% drop in household income after divorce, whereas women’s household income falls by 41%.

In light of these findings, it is evermore important for women to be aware of how their ongoing financial circumstances may be affected by divorce, not just the immediate hit to their savings. One particularly affected aspect is a woman’s retirement fund.

If you are a woman who is approaching, going through, or has recently experienced a divorce, read on to learn three reasons to prioritise retirement savings throughout this process.

1. There is a wide gender pension gap in the UK

Sadly, the gender pension gap is an ongoing form of inequality for women living and working in the UK today.

According to the NOW: Pensions gender pension gap report for 2024, on average:

• Women retire with £69,000 in their pension pot, whereas men retire with £205,000 – nearly three times more
• A woman would need to work for 19 more years to match the pension wealth of a man her age.

The report goes on to say that women taking career breaks to raise children, along with the gender pay gap, are two contributing factors.

All this to say: if you let your retirement savings fall by the wayside while you are getting divorced, you could face further pension inequality later in life.

Maintaining pension contributions, long-term cash savings, and a diverse investment portfolio may seem like an unnecessary expense during this time of change. But in fact, these foundational elements are crucial for your financial stability later in life.

2. Single people may need to save more for retirement than those who are cohabiting

While you may feel excited or invigorated by the prospect of turning over a new leaf after divorce, you may also be aware that there are some financial disadvantages to being single.

In 2019, the Office for National Statistics (ONS) found that those who live alone spend 92% of their disposable income each month, whereas those in two-adult households spend just 83%. Single individuals spend a greater proportion of their income on basic expenses like housing, meaning that there’s less in the pot to save towards future goals, including retirement.

What’s more, the cost of being retired is also going up. According to the Pensions and Lifetime Savings Association (PLSA), a “comfortable retirement” now costs £43,000 a year for one person, an £8,000 increase compared to the previous year. On the other hand, a comfortable retirement for a couple costs around £59,000 a year – meaning that the cost of retirement for a single person is not simply half of what it would be for someone who is married, as you may have expected.

With all this to think about, prioritising your retirement savings throughout the divorce process may put you in good stead to meet your retirement goals. If you have an ideal retirement age in mind, or a bucket list you’d like to tick off once you get there, saving and investing proactively may mean that divorce does not dampen the possibility of reaching these targets.

3. On average, women live longer than men

One aspect of retirement many people simply do not consider is life expectancy. We all want to live full, long, healthy lives – but with this longevity comes the need for a solid, sustainable retirement income.

The latest ONS data reveals that a woman who turned 65 in 2020 can expect to live 22 more years on average, compared to a man of the same age, who can expect to live 19.7 more years.

While this may not seem like a huge difference, using the PLSA’s benchmark of £43,000 a year to fund a comfortable retirement, this means that a single woman may need around £90,000 more in her retirement fund than a single man.

As such, if you are going through a divorce or have recently emerged from one, putting your retirement savings at the front of your mind could be highly constructive. Placing as much as you can into your workplace pension or another personal pot could mean you build a robust later-life fund over the coming years – and remember, you’ll receive tax relief on some or all of your contributions, too.

Working with a financial planner can help women shape a bright future post-divorce

The financial side of divorce can be daunting for anyone, man or woman, who is experiencing it.

With the significant statistical disadvantages that women in this position face, financial planning could be of immense value, both over the short and long term.

As a female financial planner, I can help you:

• Maintain financial stability and integrity during the divorce process
• Create a revised financial plan to suit this new chapter
• Work towards your unique career, retirement, and inheritance goals
• Shape a brighter future for yourself and your family after divorce.

To learn more about working with a financial planner who understands your needs, email lottie@truefinancialdesign.co.uk or call 07824 554288.

As a new mummy, I will be on maternity leave until July 2024, so I appreciate your patience until I am back at my desk.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All contents are based on our understanding of HMRC legislation, which is subject to change.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts. Workplace pensions are regulated by The Pension Regulator.