The terms ‘silver splitter’ and ‘grey divorce’ in the UK typically refer to divorce and dissolution involving individuals who are aged 60 or above. Due to the UK’s ageing demographic and the fact that couples are waiting until much later in life to have children, the number of silver splitters and grey divorces is at an all-time high. Unfortunately, getting divorced later in life creates some unique financial and legal complications relating to money and property that should be understood and addressed by both parties.
Grey divorce considerations
Silver splitters are typically much more reliant on achieving a favourable divorce settlement due to their age and financial situation, especially if they are no longer receiving an income from employment. As such, the divorce settlement reached between silver splitters really needs to cover all ongoing living costs throughout retirement.
When attempting to reach a divorce settlement, silver splitters should consider the following matters:
- Matrimonial assets
- Pensions
- Spousal maintenance
Matrimonial assets
One of the key challenges for silver splitters is that they are often not in a financial position to purchase another residence without selling the matrimonial home. It may also be the case that even if the marital home is sold and the proceeds split, this is still not enough money to buy two separate residences. In addition, many silver splitters do not qualify for a mortgage, so they cannot borrow sufficient funds to purchase a suitable property. In this scenario, it may be necessary to come to an alternative arrangement whereby, if possible, one person gives up their share of the marital home in lieu of other marital assets, pensions or the payment of spousal maintenance. However, this is not always possible if the other party is not in the financial position to give up their share of the marital home.
Pension
Many silver splitters put off applying for divorce due to concerns over their remaining pension/s. One of the issues is that retiring later in life may mean that any private pensions may have already been partially used, leaving less money to be shared. It is often the case that one party has built up a pension pot while employed or in business, but the other spouse has no pension provision because they gave up their career to look after the children. Depending on the amount of money in the pension, splitting the pension may not then leave enough for both parties to live comfortably.
When it comes to divorce and pension, it is important for silver splitters to seek expert advice. Do not assume that your pension can be ringfenced and not treated as a marital asset. It will almost certainly need to be split. However, the exact ratio will depend on a range of factors, including age and the level of income from the pension.
Spousal maintenance support
A common issue encountered by silver splitters when reaching a divorce settlement is the lack of income to pay spousal maintenance. A husband or wife who gets divorced when younger is more likely to be able to cover the cost of spousal maintenance than a spouse who is less financially well off.
When it comes to children, because silver splitters generally have grown-up children over the age of 18, there is no requirement to pay child maintenance. However, it is important to bear in mind that the split may result in a lower inheritance pot for the children from the marriage.
What are the alternatives to grey divorce?
Given the complexities of grey divorce, a more advantageous route may be to apply for a legal separation rather than divorce or dissolution. Legal separation means that you end your relationship without legally ending your marriage. In doing so, you can reach an agreement (separation agreement) on how your financial affairs should be separated between you. A legal separation agreement allows silver splitters to retain the tax advantages of a married couple, share pensions, and benefit from inheritance tax exemptions when one spouse dies.
