Important new research from the Manchester Institute for Collaborative Research (MICRA), a seedcorn project supported by the Pensions Policy Institute (PPI), has concluded that pension sharing on divorce could have a substantial impact on women's finances in later life.
The report also finds that any trade-offs between house and pension in divorce may not always be balanced as pension wealth can exceed property wealth for more pension wealthy couples, especially outside London.
Pension wealth is very unequally distributed. About 28 per cent of those over 30 have no private pension wealth at all. Median pension wealth is £29,492, increasing to £79,087 for those with some pension wealth, with a range from £0 to more than £8 million. Seventy-five per cent of those over 30 have accrued £155,000 or less in pension wealth.
Men have substantially more private pension wealth than women, with disparities increasing across age groups. For those aged 65-69, median pension wealth for men is just over £212,000 compared to just £35,000 for women.
Married men have the most pension wealth. For the age group 45-54, married men have median pension wealth of about £86,000 compared with £40,000 for married women, at 55-64, the disparity is £185,000 compared with £55,800. Divorced men who are not cohabiting in the age group 45 – 54 have median pension wealth of £42,000 compared to similar women's £16,000, and in the age group 55 – 64 the disparity is £100,000 compared with £19,000 for similar divorced women.
The researchers state that in about half of couples with pensions, one partner has 90 per cent of the pension wealth. Fewer than 15 per cent of couples have pensions that are approximately equal. These disparities vary little across the income and wealth distributions.
For households in the top 40 per cent by household income, median pension wealth exceeds median property wealth. For those in the highest income quintile, their median pension wealth exceeds £430,000, but their median net property wealth is approximately £325,000. This is especially likely to be the case for those living outside London and the South-East of England.
In the quartile with the highest household incomes, pension wealth is higher than property wealth in all regions bar London. In the highest income quintile, all regions show that pension wealth is on average substantially higher than property wealth (by about £400,000 - £500,000) but London again shows the effect of much higher property prices with a net surplus for pensions of around £200,000.
The report calls for more research to explore how the balance of pension wealth within couples varies across the population and the factors associated with this. This approach would need to consider the broader finances of couples; an especially interesting question here is how the asset mix changes across cohorts in response to changing patterns of homeownership and women's employment, and the impact of debt.
For the report, click here.
