Untying the knot: Divorcees twice as likely to have no savings
Swindon, February 15, 2017
- Those who are divorced are twice as likely to have no savings or investments
- Poor health, lack of savings and fear limits ability to reach life goals
- Anne Torry, Head of Zurich UK Life shares seven financial tips to bolster finances post divorce.
Divorced or separated people are twice as likely to have no savings or investments compared with those who are married (32% vs 14%), according to research by Zurich UK.
While the financial strain of divorce is no secret, the Set the Right Goals study, which examines saving habits and identifies the nation’s savings gap, shows the impact this can have on people’s financial future unless the right – and available – protection is sought.
Despite historically low interest rates, a third (36%) of divorcees keep their savings in a current account. This compares to half (50%) of those who are married. 32% of divorcees also have money in a savings account and an ISA, compared to 50% and 40% respectively for those who are married.
The study also found that, encouragingly, over half (53%) of married people are saving for later life . However, divorcees and or separated people are far more focused on short term financial goals. Only three in ten (28%) are currently saving for later life, with 65% saving towards a short term life goal such as a holiday or paying for tuition feels for a child or grandchild.
When this group was asked what would prevent them achieving their aspirations in later life, poor health (51%) topped the list, followed by a lack of savings (42%) and a fear of change (18%).
The online research of over 2,000 UK adults from YouGov, overlaid with a behavioural experiment from neuroscience specialists Mindlab, also found that more than half (54%) of those who are divorced or separated think that not having enough savings will stop them from achieving current goals compared to just two in five (41%) of those who are married or are in civil partnerships.
Anne Torry, Head of Zurich UK Life, commented:
“Divorce can be an incredibly challenging time, both emotionally and financially. Understandably, the focus is naturally on splitting immediate assets, but it’s important that the long-term is also part of the planning. In fact, after the family home, a pension can actually be the biggest asset at stake, so protecting this in the first instance is crucial.
“Taking small steps such as reviewing everyday spending to identifying a saving that can be used to increase monthly pension contributions will have a huge impact over the long term. In a low interest rate environment, a professional adviser can also help to create a plan and make the most of savings available. The earlier action is taken, the more likely it is that people will be able to achieve their aspirations now and in the future.”
To help consumers prepare for the future, Zurich has launched ‘Zurich FutureYou’, which provides tools to help people imagine, plan and manage their own financial well-being. Zurich FutureYou is designed to support people along their financial journey with interactive and methods of planning that are entirely personalised, to ensure engagement with savings matches individual aspirations.
Seven tips to bolster finances post divorce
1. Create a new budget
With your household income being impacted, it’s essential to go through your finances. Creating a budget sheet that will help you to keep track of your incomings and outgoings. It will also help you to spot where you can make cutbacks. If you’re unsure about how to get started then there are many tools available online to help.
2. Protect your credit score
You’ll be surprised at how many financial products and agreements you share with your ex-partner from utility bills, to mortgage repayments and credit cards so, it’s worth checking your credit record. Your credit report will list the details of every financial agreement you have. This will help protect your credit score from anomalous payments on the part of your former spouse.
3. Close joint accounts and open new ones in your name
It’s really important to make sure that all joint credit cards and accounts are closed, paid off in full or at the very least changed to either your name or your former partner’s. Not doing so could mean them being able to use your accounts, run up debt or use your savings. This could have a negative impact on your future. Going forward make sure you open any accounts solely in your name.
4. Think about your pension
If you’ve just been through, or are currently going through a divorce of separation, your pension is probably the last thing on your mind, but it’s essential for your future that you plan ahead – your future could depend on it. You and your partner may have built up a strong pension pot, so it’s important to pay particular attention to how this is divided, to make sure you are getting the best outcome. It’s particularly important for women who may depend on their husband’s provisions for their retirement, as they could be in for a nasty shock.
5. Don't forget about your protection needs
If you already have life cover in place in the form of a joint policy, make sure you check the policy terms. Some include a 'Joint Life Separation Option', which means that the contract can be amended to cover both parties individually. Many policies also contain options which allow you to increase the amount of cover you have following life events, including divorce or separation, without needing further underwriting. You may want to consider increasing your cover if you have had to take on a new or larger mortgage or other debts.
6. Make the most of your protection cover
Once you have changed your policy to protect you individually, it’s worth making use of any support that is offered. Many protection policies contain valuable support or counselling benefits that can provide vital help or advice if you are going through a divorce. This support can cover areas from financial to legal to emotional support. Protection can also play a key role in covering any maintenance liabilities for an agreed period, such as when children reach 18, in the event of severe illness or even death.
7. Update your will
Now that you are divorced or separated, your existing will is unlikely to be appropriate to your new circumstances. Make sure you update this as soon as possible to ensure that your wishes are followed.
All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 2073 adults. Fieldwork was undertaken between 25th - 26th October 2016. The survey was carried out online. The figures have been weighted and are representative of all UK adults (aged 18+).
900 adult participants (19-55+) who are representative of the general population took part in the Mindlab experiment in the UK from the 25th to 26th October 2016.