Experts reveal the biggest money mistakes made in divorce

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Full podcast episode transcript

[0:08] Susannah Streeter: Hello and welcome to Switch Your Money On from Hargreaves Lansdown. I’m Susannah Streeter – Head of Money and Markets.

[0:14] Sarah Coles: And I’m Sarah Coles – Head of Personal Finance.

[0:16] Susannah Streeter: And we have Helen Morrissey here – Head of Retirement Analysis. So, have you been to many weddings this season?

D’you know what, I haven’t this year – for the first time, I think, in about two decades! But, for many people, we are right bang smack in the middle of wedding season – aren’t we? – with all of the cost that entails.

[0:34] Sarah Coles: So, of course – because we’re such cheery human beings, we thought we’d cut straight from the happiness of a wedding to the misery at the other end – and the split. Because we had the divorce statistics in for 2023 – and it made for some really quite interesting reading. So, the number of divorces was actually up 28% in a year.

Now, that actually isn’t quite as bad as it looks ‘cause there was a hump that came across when we changed the divorce system to the no-fault divorce system. So, the new system actually has a long delay built into it. So, anybody who was waiting to do it under no-fault – which means you don’t have to play the blame game – they then had that big, long gap, which is actually enforced, so there were no divorces, and then they all just saved themselves up for this year – so it’s not as bad as it looks.

[1:14] Susannah Streeter: It’s so funny you say that because, actually, on social media, there seems to be a real trend for divorce parties – divorce presents. I’ve seen one wine influencer be presented by a big bottle of champagne to celebrate her divorce, with the actual date engraved on the label. So, [inaudible 1:33]. [Laughs]

[1:34] Sarah Coles: But I wouldn’t recommend anybody, necessarily, goes into the divorce business – because, actually, we’ve had a growth over time, but we have had a bit of a decline.

So, 20 years earlier, there were around a third more divorces during the year. Now, I would say that, over the very long term, we actually have seen them increase.

So, if you take someone who got married in 1963, less than a quarter of them were divorced before their 25^th wedding anniversary – and this raised to just over two-fifths of those who married in 1998. So, we have seen this long-term growth in the number of people get divorced.

And, of course, one of the things that happens as well... we stopped talking about divorce, a lot of people were going, ‘Well, I’m fine – I’m perfectly happy being married – I don’t have to worry about it.’ And the terrible thing that you have to think of is, ‘Actually – well, there’s two of us in this relationship and maybe we don’t both feel the same way about it.’

[2:17] Susannah Streeter: Yeah – and that can come as just such a terrible shock – obviously, not just personally, but for your finances as well – something you really don’t expect – it’s a real curveball. Why does it cause so many problems?

[2:31] Sarah Coles: Well, there’s a couple of bits, really. So, the first is the fundamentals – of the fact that you’ve had one household that you’ve been running with two incomes – and you’re splitting that between the two of you. So, you’re splitting your incomes between two households, and you’re also splitting all your assets between you as well – and that, fundamentally, just means you have less to live on. And then, of course, the divorce process, itself.

Now, the cost of that can vary really dramatically, but it’s not going to leave you better off – even if you go for a cut-price divorce... actually, that will cost you some money. And, of course, you’ve gotta remember that people are getting divorced older – and the older you are, the harder it is to rebuild.

So, if you think about things that you might give up during the divorce process, you have to rebuild those back once you’ve got divorced – and it can be a lot harder if you’re into your 60s and 70s – 80s or even 90s.

[3:14] Susannah Streeter: And, I suppose, if it’s acrimonious, it can be even more costly. So, what can people do while the going is good? Obviously, try and get on, in the first place, but that’s not always possible, is it?

What kind of steps can you take before you get to the situation that could become financially out of control?

[3:32] Sarah Coles: So, I would say one of the key things to think about when you’re getting married – so go back to wedding season – is that this is a really good time to have those conversations – because you’re loved-up and having a great time together... actually, you can tackle those difficult conversations – and talk about whether or not you can get a prenuptial agreement.

Now, those, actually... they’re not accepted in UK law – but, if you both get independent advice, they will be considered by a court. So, they don’t lay it down exactly how things are gonna get split, but they’ll look at what you both wanted when you went into the marriage – and that can really help if it comes to a court disagreement, where things can get really out of hand – can really help to have that in writing.

[4:06] Susannah Streeter: And, of course, drawing up an emergency fund – we hear about this – is so crucial for everybody. But even more important – isn’t it? – if you feel as though you could be in a situation whereby your relationship will break up, having an emergency fund is more important than ever.

[4:23] Sarah Coles: It’s really important. When you come to a split, you’ve got so many things going on – so many things to worry about – but actually think about cutting your costs from day one – because, if you keep running at the level that you were running at before, you’ll get into difficulties really quickly. So, it’s not gonna be the thing that’s top-of-mind, but do just sit down and draw up that emergency budget.

And you also need to think about the other finances – the really short-term stuff. So, for example, if you’ve got a joint account, then think about how you’re gonna operate that joint account. You might be on good relationships with someone, but you might not be – and you might be worried about them running up debts or spending the money in the account – so you can do things like talk to your bank, and get them to make sure that you both agree before anybody does anything on those accounts – and you’ve gotta think about things like credit cards.

So, actually, you might think, ‘Oh, we have a joint credit card.’ Actually, you don’t have a joint credit card – one of you will have a credit card and the other one will have a card on your account – and, if that’s you, you’re liable for both debts. And then, if you look at the mortgage, you’re both liable for the whole of the mortgage.

I know it’s really difficult when people are splitting up, but having that conversation about the debt – and, if you can’t agree on how you can keep paying the mortgage, talk to your lender because the lender has been through this so many times – will have things in place they can really help you with. They might be able to change your payments for the short term – that sort of thing – and it’s much better to be upfront with your lender about it, rather than missing payments or not being able to meet your obligations.

[5:35] Susannah Streeter: It’s really interesting you talk about the fact that you’ve got to talk when times are good – and maybe it’s all about creating that transparency of your finances right from the offset. Because, so many people that I talk to... they say, ‘Well, actually, I don’t really know what my partner has got and where’ – and they don’t have that full visibility. ‘Cause that’s worrying – if you get to a stage when you simply won’t know where you stand because you don’t know where the assets are in the partnership.

[6:03] Sarah Coles: Yes – so it’s partly about keeping on top of the assets that’s really important, but it’s also about keeping on top of the basics – the day-to-day. Because, if you’re somebody who’s maybe lost touch with your pension – maybe, ‘Oh, you deal with the pension – I won’t worry about it.’ Actually, then, you’ve really gotta be on top of how much you’re putting in – where it’s invested – all those sorts of things. So, really being in touch, day-to-day with it, is very important.

The other thing I would say is that divorce is such a difficult time – you do not have to do this alone. Yes, definitely talk to a lawyer – also think about a financial advisor – and then, for those things, where... you know, we’ve all heard of situations where people will ring up the lawyer – have a 20-minute conversation, where they pour their heart out and get upset – and then get charged a fortune for it – and, of course, the lawyer’s not a professional in that sort of thing. So, actually, ‘Do you need some help with that sort of thing as well?’

So, there’s a whole heap of different things to consider – and, of course, a huge part of it is the pension.

[6:51] Susannah Streeter: Certainly is – well, Helen is here to tell us more about that. What pensions implications does divorce throw up?

[6:58] Helen Morrissey: Basically, the pension can be the biggest asset that you hold as a family – and the reality is that, when it comes to divorce negotiations, they aren’t brought up probably anywhere near enough – It tends to focus on things like the family home.

Now, the problem with that is that there’s a risk that, if they’re not discussed properly, that one partner – and it does often tend to be the woman – can leave the relationship with very little in terms of retirement savings – and the divorce stats show that there’s been quite a surge in older people getting divorced. So, it could mean that it’s people in their 50s, 60s – even 70s -= who’ve relied on a partner’s pension for a very long time, then find themselves perilously close to retirement with very little, if anything, for themselves to fall back on.

[7:53] Susannah Streeter: So, a bit like your overall finances – even before you get divorced – when times are a lot better – you should be having some serious conversations – and what steps then should you be taking? What topics do you need to have in those conversations?

[8:06] Helen Morrissey: Yeah – I sound so unromantic here – it’s awful – but it can be really tempting that, when the going is good... if your partner’s got a really good pension, it can be so tempting to say, ‘That’s enough for both of us – we can rely on that.’ And, if you do stay together, that might work out well for you – but, if you don’t, you could be left with very little. And what I would also say as well is that, even if you do stay together, I would always advocate both partners tyring to build up their own pension wealth as much as possible – because that gives both partners a sense of financial independence in terms of how much they spend in retirement, which can be really helpful. Just having that control over your own money is great for both partners.

[8:50] Sarah Coles: So, in the event of a divorce, can you take us through the different options that people have with their pensions?

[8:55] Helen Morrissey: Yeah – so there’s broadly three options for sharing your pension or your SIPP. So, first of all, is pension offsetting – and that is where one person might keep the pension – for instance, if they trade it against another asset – so that could be the family home.

Now, that seems relatively straightforward – it’s a clean break, but what I would say is that, if you are the person that has walked away with the family home, then you have property, but you might not have any pension – so you have to bear in mind that you have a pension to rebuild as well.

[9:31] Sarah Coles: If you are in the family home, you’ve got the cost of running that family home when you get to retirement – and you might actually end up having to give up the home for a retirement income later.

[9:40] Helen Morrissey: Exactly – so these things do need to be thought of. So, if you can build up your own pension, then that’s really good.

The second is pension sharing – and this does what it says on the tin, really... it is where the pension is split between both parties. So, this does have the advantage of being a clean break for both partners – you both walk away with a pension – but it can be complicated and it does require a Pension Sharing Order from the Court – which needs to be borne in mind.

The third option is a Pension Attachment Order. Now, in Scotland, this is known as pensions earmarking.

Now, this is where the person who holds the pension... they keep hold of the pension – but then, when they hit retirement, they then start paying an income from their pension to their ex-spouse. Again, it helps the pension to be shared – no-one has to start from scratch – but it is a little bit complicated in that it is essentially maintenance paid from the pension – and, if things have been a little bit acrimonious, the partner who’s got the pension could play all sorts of silly games – like maybe look to delay taking the pension – therefore it means that you get a delayed pension yourself. So, there’s lots of things to think about as to what the right option is for you.

[11:01] Sarah Coles: And I think a lot of it comes back to that sense of control as well, doesn’t it? – that you were talking about – not having your own pension, and being at the mercy of when your ex decides to draw their pension – actually takes all the control away from you.

[11:11] Helen Morrissey: Exactly. So, as I say, I go back to what I said – wherever possible, build your own pension. If you need any kind of guidance or information, there’s a great government-backed service called Pension Wise – which can give you a real helpful treasure trove of information on all things retirement – so that’s really useful. It is also worth saying that you cannot access a pension until the age of 55 – so you always need to factor that into your plans as well. That age is going up to 57 in 2028.

[11:44] Susannah Streeter: And also, you need to be prepared – don’t you? – that this could take a considerable time, trying to sort out your pension. There have been reports of, for example, teachers – who have been forced to split their pension because of divorce – waiting so long to try and get to some kind of agreement. So, you’ve gotta think about the time horizons – and get on it quicker than you might think.

[12:06] Helen Morrissey: Absolutely – as you say, you don’t want to be left in limbo – you know, this is your retirement income, at the end of the day – and you don’t wanna be going in there with that fear factor that you might not have an income when you need it.

[12:19] Sarah Coles: Okay – well, that’s obviously super-cheery subject. As ever, we’ve managed to dwell on the misery – maybe it’s a thing that I carry around with me everywhere I go. [Laughs]

[12:26] Susannah Streeter: But I did tell you though...

[12:27] Sarah Coles: [Laughs]

[12:27] Susannah Streeter: ...didn’t I? – about the celebratory bottles that are being sent out to celebrate people’s divorces. Because, actually, for many people, it’s... yeah, you’ve gotta get over the finances, but it can be a real new lease of life for some people.

[12:39] Sarah Coles: Yes – and so now I’ve got my stat of the week – and we’re talking about new lease of life. It’s never too late to have a new lease of life – but, mm-hm, call it late to get divorced.

So, some people actually get divorced really late in life. I looked at the Guinness World Records and had a look at the oldest person ever to get divorced – and I’m gonna give you no clues at all. How old d’you reckon the oldest person was?

[12:59] Helen Morrissey: D’you wanna go first, Susannah?

[13:00] Susannah Streeter: It must be really... I’d say 99.

[13:03] Sarah Coles: 99’s a good guess. Helen?

[13:05] Helen Morrissey: I’m gonna go 103.

[13:07] Sarah Coles: Ah – oh my goodness, you two are so close – it’s 101.

[13:11] Susannah Streeter: Is it, really?

[13:12] Helen Morrissey: Amazing!

[13:12] Sarah Coles: You say it’s never too late for a fresh start, but it’s quite late at 101! I mean, hey, what do I know... maybe it’s like a...

[13:19] Susannah Streeter: They put their...

[Over speaking 13:19]

[13:20] Sarah Coles: ...’Room 101!’

[Laughter]

[13:23] Susannah Streeter: And that neatly rounds up today’s episode.

Before we go, we should say that this was recorded on 14^th July 2025 and all information was correct at the time of recording.

[13:33] Sarah Coles: Nothing in this podcast is personal advice – you should seek advice if you’re not sure what’s right for you. Investments and any income they produce can rise and fall in value, so you could get back less than you invest, and past performance is not a guide to the future. Pension rules can change and benefits depend on individual circumstances.

[13:45] Susannah Streeter: Yes – this is not advice or a recommendation to buy, sell, or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.

[13:55] Sarah Coles: And this hasn’t been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication.

[14:01] Susannah Streeter: Non-independent research is not subject to FCA rules prohibiting dealing ahead of research. However, HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing.

[14:14] Sarah Coles: You can see our full non-independent research disclosure on our website for more information.

So, all that’s left is for us to thank Helen Morrissey for being here – and being amazing – and our Producer, Elizabeth Hotson.

[14:22] Susannah Streeter: Yes – you’re both amazing. Thank you very much for listening – we’ll be back again soon. Goodbye!

[14:26] Sarah Coles: Goodbye!

[14:27] Helen Morrissey: Goodbye!