Women who divorce later in life are missing out on significant state pension uplifts due to a complex system that may be little understood by advisers, research has found.
Pension consultant LCP said the number of divorces over the age of 60 is increasing year-on-year. However, it added a rule which allows women to substitute her ex-husband’s National Insurance record for her own, to get a state pension boost, is not being fully utilised.
It said about 6,000 older couples divorce a year. LCP explained the vast majority of these women reached state pension age before 6 April 2016 and come under the ‘old’ state pension system, which makes significant provision for divorced women.
However, it explained if they divorce after pension age they only get a benefit uplift if they inform the Department for Work and Pensions about the split.
Recent research by LCP previously found tens of thousands of divorced women in retirement on very low state pensions.
Paul Cobley, director of Oak Barn Financial Planning and a specialist in divorce cases, said people are very often unaware of their rights and may face practical barriers if they contact the DWP.
He said: “I have to give my clients the confidence to persist, otherwise many would give up at the first rejection. It also concerns me that not only are advisers and lawyers not telling their clients about substitution, perhaps through a lack of understanding themselves, but there is little guidance out there generally, especially on the government website. Yet for low earners this guidance can often be the most valuable advice a person ever receives, literally life-changing.”
He added that he had been advising on this sort of situation for about 15 years and clients’ experience with DWP had “deteriorated over that time”.
To assess the number of divorced women making post-retirement claims for their pension to be reassessed, Steve Webb, partner at LCP, tabled a Freedom of Information request to the DWP. However, DWP said that they did not know how many divorced women applied for an uplift following a post-retirement divorce.
The DWP said in a September Freedom of Information response: “We do not keep records of people making applications for uplifts in state pension following divorce. The data we do hold are of snapshots of payments of state pension at specific points in time. We do not track the amounts of state pension people receive over time. Thus, we are unable to say whether any person has received the type of uplift you reference to in your request without creating new data.”
Analysis by Webb of data from the Family Resources Survey suggests that there are approximately 100,000 women over state pension age whose current marital status is ‘divorced’ and who are not receiving a full basic state pension.
Many of these will be women who divorced before pension age and who are not getting a full pension even with the benefit of an ex-husband’s contributions. But a significant minority are likely to be women who divorced post pension age and have not yet had their pension reassessed.
Webb urged women who divorced over pension age and who reached pension age before 6th April 2016 to make sure that they notify the DWP as a matter of urgency in order to get their state pension reviewed.
He Webb said: “Every year thousands of women over state pension age get divorced, but many may not be aware that they can qualify for a state pension boost as a result. Worryingly even some financial advisers, lawyers and DWP call handlers seem to be unaware of the rules.
“Any woman who reached pension age before 6 April 2016 and has since got divorced should contact the DWP if she is not on a full basic state pension to see if she is entitled to an increase based on her ex-husband’s contributions”.