How women who
divorce in later life could be missing out on thousands in state pensions

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Tens of thousands of women who divorce later in life – so-called ‘silver splitters’ – may be missing out on huge sums in state pension rights because of a complex and little understood system according to new analysis from LCP.

Over the period from 1998-2018, more than 100,000 women aged 60 or over divorced according to figures from the Office for National Statistics (see chart below). In the late 1990s and early 2000s, there were roughly 4,000 divorces involving women over sixty each year but the numbers have now risen to around 6,000 per year. The vast majority of these women reached state pension age before 6th April 2016 and come under the ‘old’ state pension system which makes significant provision for divorced women. But if they divorce after pension age they only benefit from a pension uplift if they notify DWP of their divorce. There is worrying evidence that many may not be aware of this or may be put off when they try.

Under the old state pension system, a married woman who divorced can substitute her ex husband’s National Insurance record for her own up the date of their divorce for purposes of working out her basic state pension. This very often results in a significant uplift. For example, a married woman previously on the standard ‘married woman’s rate’ of £80.45 can instead get a basic pension of £134.25 if her husband has a full contribution record. Over the course of a twenty year retirement, this can increase her state pension income by more than £50,000.

For women who divorced (and did not remarry) before state pension age, any ‘substitution’ based on her ex husband’s NI record should have taken place when she claimed her state pension. But where women divorce post retirement, there is no automatic process for an uplift to take place. Women (and their advisers) need to be aware of these rules and make a claim.

Recent research by LCP previously found tens of thousands of divorced women in retirement on very low state pensions, and evidence from specialist lawyers and advisers suggests that state pensions are rarely given much attention in later life divorce cases.

Karin Walker, founder of KGW Family Law and author of a forthcoming book on later life divorce said:

“State pensions are all too often disregarded during divorce when they should be one of the first things looked at”.

Paul Cobley, director of Oak Barn Financial Planning, and a specialist in divorce cases said that not only are people often not aware of their rights but they can face practical barriers even if they do 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”

Describing the problems which divorced clients can face in getting their state pensions reassessed, Paul Cobley added:

“I have been advising on substitution cases for around 15 years now and the client’s experience in dealing directly with DWP has significantly deteriorated over that time. Many years ago these claims were turned around quite efficiently, whereas nowadays they can take up to a year. It is common for my clients to be rejected at the initial stages by people who clearly don’t understand what substitution is. I hear stories like “They didn’t understand what I was talking about” and “I was told that it’s not possible to do what you have suggested”.

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. They said:

“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”. (Source: DWP FOI reply to Steve Webb, September 2020).

Analysis by Steve 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.

Steve Webb is now urging 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.

Steve 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 6th 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”.