Divorcing in Later Life: What You Need to Know

Divorce at any age is a significant life event, but when it happens after 60, the financial and practical stakes are uniquely complex. The decisions you make now will shape your quality of life for the rest of your retirement. As a specialist family law solicitor advising high net worth clients across London and the Home Counties, I see a growing number of what are sometimes called “silver divorces”, and the issues they raise demand careful, specialist attention.

Here are the key areas you need to understand:

1. Housing: More than just a roof over our head! For some couples over 65, the family home is their single largest asset, and frequently their primary source of financial security. The instinct to retain the home at all costs is understandable, but it is not always wise, or sustainable.

The critical question is whether you can afford to keep it, both in respect of capital and ongoing income needs. Running a property that was previously used as a large family home single-handedly in retirement (and covering mortgage payments if any remain, maintenance, insurance, and council tax) on a fixed income is often harder than people anticipate. Before insisting on retaining the matrimonial home, you need a brutally honest analysis of your ongoing income and outgoings together with an eye on whether you wish to deal with all the inherent issue.

IR35 has a direct impact on your divorce settlement if you operate through a personal service company, your IR35 status matters enormously in a divorce context. Whether you sit inside or outside IR35 affects your net take-home pay, your tax liabilities, and how your income is characterised.

Options to consider include a deferred sale arrangement (sometimes called a Mesher Order), though these are less commonly suitable at this age given the shorter time horizons involved. More often, a clean break through sale and division of proceeds is the most practical solution, allowing both parties to downsize into appropriate accommodation without ongoing financial entanglement. In many cases both parties will have the financial resources to buy the property they deem suitable.

If one party wishes to buy out the other, be aware that obtaining a mortgage post-65 can be difficult, (although many simply do not need borrowing). For those that do, you should be aware that lenders impose age caps, and income from pensions may be assessed differently to employment income. Equity release products exist but carry significant costs and complexity. These should never be entered into without independent financial advice.

2. Income Needs: Planning for a long retirement life expectancy has risen dramatically. A woman aged 65 today can expect to live, on average, into her late eighties; a man into his mid-eighties. That means your financial settlement needs to sustain you potentially for two decades or more.

In divorce proceedings, income needs are assessed with reference to the standard of living enjoyed during the marriage (but they are assessed “generously”) and what each party reasonably requires going forward. At 65 and beyond, earning capacity is limited or nil. This is not a situation where a court is likely to expect you to return to work to supplement a modest settlement. Individuals by their late 70s are often spending much less on leisure pursuits than they are in their 60s (mainly due to health issues), so it is always worth taking stock of the fact that more income is needed in the earlier days.

Spousal maintenance remains available in principle even post-retirement, though courts increasingly prefer a clean break where assets are sufficient to achieve one. If maintenance is awarded, consider whether it should be capitalised as a lump sum (a process involving actuarial calculations) to provide certainty and finality.

Budget carefully and honestly. Include costs that younger divorcees may overlook, consider potential care costs, health insurance or private medical expenses, home adaptations, and the increasing likelihood of needing professional care in later life. These should form part of your needs assessment in any financial settlement, especially if health issues have already been identified.

3. Pensions: Often the largest asset in the room, pensions are frequently the most significant financial asset in a later-life divorce, yet they remain poorly understood by many clients and, candidly, by some practitioners. Getting pension division right is non-negotiable. For the boomer generation, final salary pensions can be worth their weight in gold.

There are three principal mechanisms for dealing with pensions on divorce:

Pension Sharing Orders divide a pension fund at the point of divorce, giving the receiving spouse their own carved out pension pot, either within the same scheme (an internal transfer) or in a new arrangement (external transfer). This achieves a genuine clean break and is generally the preferred approach for those in or near retirement. It essentially allows both parties to moved forward independently of one another.

Pension Attachment Orders direct that some or all pension income or lump sum payments be paid to the other spouse when the pension comes into payment. These are rarely advisable: they maintain financial dependency, lapse on remarriage, and are contingent on the pension holder’s decisions about when and how to draw benefits. Where possible Pension sharing orders are much preferred.

Offsetting involves one party retaining the pension while the other receives an equivalent share of other assets, i.e. the family home or other capital assets. This can appear attractive but is fraught with difficulty: pension and property values are not directly comparable because of tax treatment, liquidity, and income-generating potential. Any offsetting exercise requires a pension actuary’s input via a PODE report.

For defined benefit (final salary) schemes, the pension is valued using a Cash Equivalent Transfer Value (CETV), but CETVs are widely recognised as often undervaluing these schemes. An independent pension actuary via a PODE report should always be instructed to provide an adjusted figure before any sharing calculation is agreed where there is a substantial final salary pension scheme involved.

Quite often I come across parties who have state or private pensions in foreign countries. These can never be directly compared to UK pensions, and a holistic remedy is often needed.

4. The State Pension: Do Not Overlook It. The State Pension is frequently ignored in divorce proceedings, particularly among higher net worth clients where private pension wealth is substantial. This is a mistake.

Under the New State Pension (applicable to those reaching state pension age after April 2016), the full amount is currently £221.20 per week (2024/25). Entitlement is based on National Insurance (NI) contribution records, and the maximum requires 35 qualifying years of contributions.

On divorce, each spouse’s State Pension entitlement cannot be shared via a pension sharing order, it remains personal to the individual. However, the State Pension is highly relevant in two respects.

First, it forms part of each party’s income assessment. A spouse who has a full State Pension entitlement is in a materially different financial position to one who does not. A party with gaps in their NI record (often a spouse who took career breaks to raise children) may have a reduced entitlement, and this disparity feeds directly into the maintenance and needs analysis (although be aware that you can purchase NI contributions from the government).

Second, prior to April 2016, it was possible to derive a higher State Pension based on a spouse’s NI record. Under the transitional provisions of the New State Pension, some individuals retain a “protected payment” derived from historical contributions, including those based on a spouse’s record. Establishing precisely what each party will receive from the State Pension is an essential step in the financial disclosure process.

Gaps in NI records can sometimes be addressed by making voluntary Class 3 NI contributions. At present this can be done going back to 2006, which is a relatively cost-effective way of improving retirement income.

5. Tax Considerations

The tax treatment of assets in a later-life divorce deserves specific mention. Capital Gains Tax (CGT) implications arise on the transfer of assets between spouses, and the rules changed significantly in April 2023. Divorcing spouses now have up to three tax years following the tax year of separation (and in some circumstances longer) to transfer assets between themselves at no-gain/no-loss for CGT purposes.

Pension lump sums, property sales, investment portfolios, and business interests all carry different tax profiles. A pound held in a pension is not the same as a pound of equity in a property, and settlements should always be stress-tested against their after-tax values. Involve a specialist tax adviser alongside or via your family solicitor.

6. Practical Steps to Take Now

If you are approaching a divorce after 65, I would recommend the following immediate steps:

Gather comprehensive financial disclosure early. This means pension statements, CETVs from all schemes, property valuations, investment and savings records, and details of any inheritance received or anticipated.

Instruct a specialist. Later-life divorce involves pension law, tax law, and financial planning in ways that a generalist practitioner may not adequately address. Ensure your solicitor has genuine experience in this area.

Seek independent financial advice. A financial adviser who specialises in divorce, ideally a Chartered Financial Planner with Resolution accreditation, can model the long-term implications of different settlement structures in a way that goes beyond what legal advice alone can provide.

Consider mediation. Contested litigation is expensive, slow, and emotionally draining. For couples willing to engage constructively, alternative dispute resolution can preserve more of the marital wealth for both parties.

Do not rush. The pressure to achieve a quick settlement is understandable, but decisions made hastily in later-life divorce can be financially irreversible. Take the time to get it right.

If you are looking for experienced, pragmatic and cost-effective advice on a family law matter please contact Aziz Malik: azizmalik@bexleybeaumont.com  |  07966 375115