Divorcees carry debt burden into retirement
The costs of divorce are notoriously high, but a new study by Alliance & Leicester shows how separation and divorce affect people’s financial health for many years to come.
Divorced people are far less comfortable with their debt than those who are separated and who have never married. The biggest contrast however is between the married couples who are still together and those who have divorced.
Divorced people owe just under £5,000 on average – (£4,984) each – not counting any mortgage. This is equivalent to over a quarter (28%) of their annual incomes.
Married people owe £5,245 between them – or £2,600 each. More importantly however, married couples enjoy a much higher incomes, so their debt is equivalent to less than a sixth (15.9%) of their annual income. Divorced people pay a higher proportion of their incomes servicing their debt than any other group. They also have lower incomes and overall their financial position is far less comfortable.
Divorcees nearer retirement
Divorcees tend to be older – 54 on average – and as such are nearer retirement than these other groups. Carrying a high debt burden at this late stage in working life leaves them much more vulnerable. Divorcees are also twice as likely to be unemployed than their married counterparts – 4% compared to 2%.
Chris Rhodes, managing director of Alliance & Leicester retail banking said: “Splitting up clearly gives rise to a lot of costs, including setting up a new home. This is reflected in the fact that the recently separated have the highest overall level of debt at £6,262.”
“However, over the years, divorced people’s finances do not seem to improve – showing how long-lived the effects of relationship breakdown can be.”
Divorcees have fewer assets
Nearly half (44%) of divorcees have no savings at all. This compares to just 27% of married couples and a national average of 32%. Those who class themselves as separated are even less likely to have savings, perhaps because they have more recently incurred the costs of setting up a new home.
The research shows however, that far from improving, their situation is likely to deteriorate over time. While the overall amount owed may fall slightly, divorcees are carrying this burden towards retirement.
They are also much less likely to have the financial security that comes from owning your own home. 82% of married couples own their own home, compared to just 61% of divorcees. Following divorce, it seems that a large proportion of divorcees never get back on the housing ladder. Indeed, divorcees are much more likely than any other group to live in social housing (24% compared to the national average 14%).
Chris Rhodes concluded: “Divorce is financially as well as emotionally costly. Our research shows how severe these financial effects are. The majority of divorcees in our sample are over 50. They have fewer assets in terms of savings or owning their own homes.”
“Being in poorer financial shape at this age than their married counterparts will have clear knock-on effects into retirement.”
The costs of divorce are notoriously high, but a new study by Alliance & Leicester shows how separation and divorce affect people’s financial health for many years to come.
Divorced people are far less comfortable with their debt than those who are separated and who have never married. The biggest contrast however is between the married couples who are still together and those who have divorced.
Divorced people owe just under £5,000 on average – (£4,984) each – not counting any mortgage. This is equivalent to over a quarter (28%) of their annual incomes.
Married people owe £5,245 between them – or £2,600 each. More importantly however, married couples enjoy a much higher incomes, so their debt is equivalent to less than a sixth (15.9%) of their annual income. Divorced people pay a higher proportion of their incomes servicing their debt than any other group. They also have lower incomes and overall their financial position is far less comfortable.
Divorcees nearer retirement
Divorcees tend to be older – 54 on average – and as such are nearer retirement than these other groups. Carrying a high debt burden at this late stage in working life leaves them much more vulnerable. Divorcees are also twice as likely to be unemployed than their married counterparts – 4% compared to 2%.
Chris Rhodes, managing director of Alliance & Leicester retail banking said: “Splitting up clearly gives rise to a lot of costs, including setting up a new home. This is reflected in the fact that the recently separated have the highest overall level of debt at £6,262.”
“However, over the years, divorced people’s finances do not seem to improve – showing how long-lived the effects of relationship breakdown can be.”
Divorcees have fewer assets
Nearly half (44%) of divorcees have no savings at all. This compares to just 27% of married couples and a national average of 32%. Those who class themselves as separated are even less likely to have savings, perhaps because they have more recently incurred the costs of setting up a new home.
The research shows however, that far from improving, their situation is likely to deteriorate over time. While the overall amount owed may fall slightly, divorcees are carrying this burden towards retirement.
They are also much less likely to have the financial security that comes from owning your own home. 82% of married couples own their own home, compared to just 61% of divorcees. Following divorce, it seems that a large proportion of divorcees never get back on the housing ladder. Indeed, divorcees are much more likely than any other group to live in social housing (24% compared to the national average 14%).
Chris Rhodes concluded: “Divorce is financially as well as emotionally costly. Our research shows how severe these financial effects are. The majority of divorcees in our sample are over 50. They have fewer assets in terms of savings or owning their own homes.”
“Being in poorer financial shape at this age than their married counterparts will have clear knock-on effects into retirement.”
posted by tony at 2:15 PM
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