Thousands of separating couples could be unknowingly putting their future retirement finances at risk by overlooking pensions during divorce settlements, an expert has warned.
While the family home often becomes the main focus during divorce negotiations, a leading financial advisor has said pensions are regularly forgotten, despite often being one of the most valuable assets a couple owns.
Sam Robinson, a principal financial adviser at Almond Financial, warned that ignoring pensions during a divorce could leave people facing major financial problems later in life.
“People naturally focus on the house, savings and immediate costs during a divorce, but pensions are often one of the biggest assets on the table.
“We regularly see people making rushed decisions during settlements without fully understanding the long-term impact on their retirement.”
Mr Robinson also revealed five divorce pension traps couples should avoid.
1. Assuming the family home is the biggest asset
Many couples focus entirely on property wealth without realising pensions may actually be worth more.
Robinson said: “Some workplace pensions built up over decades can easily exceed the value of the family home, particularly defined benefit schemes.
“Overlooking them during negotiations can create a huge financial imbalance later on.”
2. Leaving pensions out of the settlement altogether
Surprisingly, pensions are sometimes barely discussed during divorce proceedings despite being a huge player in the family finances.
“One of the biggest mistakes people make is agreeing a financial settlement before properly assessing all pension assets.
“That can leave one person significantly worse off when they eventually reach retirement.”
3. Not understanding pension sharing orders
Many divorcing couples also misunderstand how pensions can legally be divided.
“There’s often confusion around pension sharing orders and what each person may actually be entitled to.
“Without specialist advice, people can agree to settlements they later regret.”
4. Trying to handle pension decisions without expert help
Pensions can become extremely complicated during divorce proceedings and trying to do it alone can cost you in the long-run.
“Pension rules vary hugely depending on the type of scheme involved, and mistakes can be incredibly costly.
“Getting specialist financial advice before finalising a settlement can make a major difference to your long-term security.”
5. Forgetting to update pension beneficiaries after divorce
Many people also fail to remove former spouses from pension beneficiary nominations after separating.
“One of the most overlooked admin tasks after divorce is updating pension beneficiaries.
“Failing to do this can create major complications later and potentially mean pension benefits go to someone you no longer intended.”
Mr Robinson also added:
“Divorce is already emotionally and financially stressful, but overlooking pensions can create problems that don’t become obvious until years later.
“Taking the time to properly understand pension assets during a settlement could make a huge difference to someone’s financial security in retirement.”
