The rise in divorces is down to people living longer and getting married later in life
The rise in so-called “silver splitters” is down to people living longer and getting married later in life, according to the Office for National Statistics.
Both trends are likely to continue and while getting divorced is much easier than it used to be, the financial side can be a nightmare, including for the growing number of cohabiting couples.
Careful planning can help prevent couples from getting tied up in financial knots.
Last year, 92 out of every 10,000 married women aged 50 to 54 in England and Wales got divorced, up from 68 in 1993, with similar increases for those in their late 50s and the over 60s.
Sarah Coles, personal finance analyst at IFA Hargreaves Lansdown, said a split in later life can be catastrophic as older people typically have more assets to lose: “You also have far less time to get your finances back on track.”
Splitting pensions is particularly complex, especially where they are mostly in one partner’s name.
Couples can choose to offset the value of any pension against other assets such as the family home, or divvy up the pension between them.
This can either be done on divorce, or when the pension starts paying out.
Separated couples need to write new wills to ensure their assets go to the right people
The problem with leaving it until later is that it prevents a clean break divorce, leaving couples financially tied for years.
“This is a complex area, so consider specialist financial advice,” Coles said.
Maike Currie, investment director for Fidelity International, said divorce can be particularly devastating for the over 60s, especially women: “Stay-at-home mums or those who let their husbands handle the finances during a long marriage could find themselves in dire straits with little savings of their own.”
As life expectancy rises women should look to build savings in their own name, even while raising children or managing the home.
Women who are not working can still contribute up to £2,880 a year into a pension and receive 20 per cent basic rate tax relief worth £720, lifting the total contribution to £3,600.
“Consider using some of your annual £20,000 tax-free Isa allowance as well,” Currie added.
If transferring other assets, such as investments, she said do it in the same tax year that you separate: “A husband and wife can transfer assets without a capital gains tax liability. Leave it too late and you may face a tax charge.”
Separated couples also need to prepare new wills to ensure their assets go to the right person when they die. “Your existing will does not become null and void when you divorce, only when you marry, so update yours as soon as possible after the break-up,” she said.
Rose St Louis, Zurich head of strategic partnerships, said divorcing couples should make sure they are fully financially separated as well: “This means closing joint bank accounts and credit cards, and opening new ones in your own name.”
If you fail to do this, your ex could continue to spend your money, run up debts in your name or even raid your savings.
Order a copy of your credit record, available from Equifax or Experian, which will list details of every financial agreement you have.
St Louis said: “You may be surprised to see how many financial products and agreements you share with your ex such as utility bills, mortgage repayments and credit cards.”
If you remain financially linked and your ex-partner runs into financial difficulties, this could hit your credit score and ability to borrow money in your own name.
You can ask the credit agencies to remove your ex-partner’s information from your report, a process called a financial disassociation.
St Louis said if you have joint insurance such as life cover, check the policy terms: “Some include a ‘joint life separation option’, which means the contract can be amended to cover both of you individually.”
You may also be able to adjust the amount of cover without the need for further underwriting.
If you are newly single and taking out a mortgage to buy a property in your own name, consider income protection or critical illness cover to meet your monthly debt repayments in case you fall ill and cannot work.
Richard Morley, partner in the tax dispute resolution team at BDO, said inheritance tax (IHT) planning adds an extra layer of complexity in divorce.
Separating couples often have commitments such as buying a new home and this makes it harder to make tax-efficient gifts to the next generation: “Lifetime gifts can be completely tax-free provided the giver survives a further seven years, so missing out on this could significantly increase your family’s IHT bill in the long run.”
Remarriage can imperil your children’s inheritance.
Morley added: “Without careful trust planning, your new spouse may end up inheriting instead of your children, with the assets finding their way to the new family.”
Getting divorced in later life is not an easy option, especially when it comes to splitting up the silver.