Financial advice for women in divorce: why keeping the house could cost £8,500 a year

Financial advice for women in divorce could help them avoid being almost £8,500 a year worse off in retirement by keeping the family home instead of taking a share of their husband’s pension, according to research.

New Newspage research, sponsored by Evolution Financial Planning, found that a 45-year-old mother who had spent several years caring for her children could be better off taking an equal share of her husband’s pension and downsizing, rather than trading away pension rights to retain the family home.

The couple were assumed to have an average £273,000 home with a £167,691 mortgage, plus his £100,000 pension and her £19,000 pension. Their £224,309 estate was divided equally, giving each person assets worth around £112,155.

Keeping the house would leave her with a £167,691 mortgage and a pension projected to be worth £13,334 at 68. Selling it, buying a £192,704 property and taking half the combined pensions would leave her with a £140,050 mortgage and a pension projected to reach £115,896. 

The calculations assume retirement at 68, 2.5% annual house-price growth, 5% pension growth and 2% inflation.

Sharing the pension would produce estimated retirement income of £22,094 a year before tax, including the State Pension, compared with £13,646 if she kept the house – a difference of £8,448 a year. 

Her total property and pension wealth at 68 would also be around 4% higher, at £331,539 rather than £318,831.

Should I keep the house after divorce?

Keeping the family home can provide continuity, particularly when children are involved. However, the emotional value of remaining in the property needs to be considered alongside the mortgage, maintenance costs and assets being surrendered in return.

A person awarded the house in a divorce settlement may still need their mortgage lender’s agreement to transfer the borrowing into their sole name. The lender will conduct its own affordability assessment, regardless of what the divorce settlement says.

Pensions can be among the largest assets accumulated during a marriage, but they do not provide the same immediate sense of security as a home. Trading pension rights for property can therefore leave someone with substantial housing wealth but insufficient income in retirement.

Rebecca Robertson, Independent Financial Adviser, Planner and Director at Evolution Financial Planning, commented: "The biggest mistake I see women make during divorce is focusing on short-term security rather than long-term financial independence.

“Many understandably want to keep the family home, but property doesn't provide retirement income, and pensions are often among the most valuable assets being divided.

“Before agreeing to a settlement, women should ensure they understand the true value of all assets, including pensions, investments and savings, and consider whether the outcome will still support them financially decades into the future.

“This is especially important for women who have taken career breaks or earned less than their partner, as they may have had fewer opportunities to build their own pension and financial resilience.

“Seeking advice early from a financial planner can help women understand the real-life impact of different settlement options and avoid costly mistakes. Divorce is emotional, but financial decisions made during this time can affect the rest of your life."

Can I afford the mortgage after divorce?

Being awarded a property does not guarantee that its mortgage can be transferred into one person’s name. The lender will examine that person’s income, expenditure, credit history and existing financial commitments.

This can be particularly important for women who have taken career breaks, worked part-time or previously relied on their husband’s earnings. Some lenders may consider maintenance, benefits and income from more than one source, but their criteria differ.

The calculation should also include what happens if child or spousal maintenance ends, mortgage rates rise or household costs increase. Affording the monthly payment immediately after divorce does not necessarily mean it will remain sustainable.

Emma Jones, Managing Director at Runcorn-based Whenthebanksaysno.co.uk, said: "One of the biggest financial mistakes someone can make during divorce is agreeing to keep the family home without knowing whether they can afford the mortgage on their own. It's understandable, especially when children are involved.

“But being awarded the property in a divorce settlement doesn't automatically mean a lender will agree to transfer the mortgage into your sole name. For women who have spent years raising children, working part-time or relying on their partner's income, borrowing options may look very different.

“However, some lenders may consider maintenance payments, benefits or multiple income sources. Before agreeing to keep the family home, make sure the mortgage is affordable on your own income. A divorce settlement might give you the house on paper, but you need to make sure you can afford to keep it in real life.”

What happens to pensions in divorce?

Pensions may be divided through a pension sharing order, which transfers a specified proportion of one person’s pension rights to the other. The recipient can then hold pension benefits independently from their former spouse.

Another approach is pension offsetting, where one person keeps more of another asset – frequently the family home – in return for giving up some or all rights to the other person’s pension.

However, property and pensions cannot necessarily be compared pound for pound. They are taxed differently, provide different benefits and may grow at different rates. A pension provides retirement income, while accessing money held in a home may require selling, downsizing or borrowing against it.

Malcolm Davidson, Director at Hull-based UK Moneyman, commented: "Keeping the family home may feel like holding on to stability, especially with children involved, but giving up pension rights to retain it can leave women with a valuable property and too little retirement income.

“Before agreeing a settlement, we recommend speaking to a Mortgage Advisor to check affordability on one income, including what happens when maintenance ends if applicable.

“Women divorcing later in life ought to consider property, pensions and savings in the round. Downsizing or later life lending/equity release may help, but all options should be explored before committing.

“Another good idea is to try to involve a financial planner if possible alongside a solicitor. We recommend collating pension valuations, mortgage statements, income and debt details, as well as a realistic budget.

“If time out of work has been taken to raise children then a State Pension forecast is worth getting. The key question is: will this settlement support me in 20 years’ time, as well as today?"

What financial information do I need during divorce?

The starting point is a complete picture of both parties’ finances. This can include property valuations, outstanding mortgages, pension valuations, savings, investments, debts, income and regular expenditure.

Women who have not previously managed the household finances may need time to understand what is held, where it is held and how different settlement options could affect their future income.

It is also important to prepare a realistic post-divorce budget. This should include housing, utilities, council tax, childcare, insurance, debt repayments and the possible end of maintenance payments.

Rakhee Wood, Founder & Independent Financial Adviser at Butterfly Financial Planning in Bromley, said: “When your marriage ends, it is not just your relationship that changes. It is the future you thought you had.

“Suddenly, you are asking questions you never expected. Where will I live? Will I have enough money? Will I be okay on my own? It can feel frightening and overwhelming. And when emotions are running high, it is tempting to make decisions just to get things over with.

“But those decisions could affect your future. One mistake is fighting to keep the family home without considering whether you can afford to run it, or what you might be giving up in pensions. Another is undervaluing your contribution.

“Raising children, running a household and supporting your partner deserve to be recognised. Before agreeing to a settlement, ask yourself: Does this work for me now and for the rest of my life?

“My advice? Speak to a financial planner early, alongside your solicitor. Understand your options before making big decisions. You deserve to feel financially secure and confident."

Should I delay agreeing a divorce settlement?

Divorce can create pressure to accept a settlement simply to end the emotional and financial strain. However, decisions involving property, pensions and investments can have consequences lasting decades.

Modelling different outcomes can illustrate how each option affects immediate housing costs, mortgage affordability, savings and retirement income. The most valuable settlement on paper may not provide the most sustainable income or lifestyle.

A solicitor can explain the legal consequences of a settlement, while a financial planner can model how the assets may work in practice. Their roles are different but can be complementary.

Gosia Dawson, Director at London-based Glade Financial, said: "One of the biggest financial risks during divorce is making permanent decisions when you're emotionally exhausted and just want everything to be over.

“I’ve seen how difficult it can be for women who haven't previously managed the family finances. Suddenly they're expected to understand pensions, mortgages, investments and what their financial future might look like on one income.

“My advice is not to rush into agreeing a settlement simply to achieve closure. Before signing anything, understand what your life will actually cost afterwards, what income you'll have and whether the settlement will support you in retirement.

“A financial planner can help model different scenarios, so you're not making decisions based on fear or assumptions. Divorce isn't just about dividing what you've built together. It's about making sure you can build a financially independent life afterwards."

Your questions answered

Questions answered by Rebecca Robertson, Independent Financial Adviser, Planner and Director at Evolution Financial Planning:

What is a wife entitled to in a divorce settlement in the UK? 

In the UK a wife is not entitled to half of everything automatically. The courts wish to achieve a fair outcome, with children’s needs taking priority. All assets are taken into account and circumstances: age, length of marriage, income, assets, pensions, housing needs, longer term earning capacity, standard of living, health and overall contributions made by both parties.

A short marriage with no children, each party is likely to retain assets they brought into the marriage and the remaining would depend on immediate needs.

A long marriage, all monies are matrimonial assets and a starting point is 50/50 but is adjusted based on circumstances.

Can I get free financial advice when I'm going through a divorce, and where do I start?

Those with low incomes and/or low levels of savings may qualify for Legal Aid. Citizens Advice can be a good source of information. There is also a Family Mediation Voucher Scheme where you may qualify for up to £500. Often Solicitors have free 30 minute consultations, which allow the individual to gain a clearer picture of their own financial position. It can also be cost effective to work with a family mediator (often they have a back ground in family law) as they aren’t providing legal advice but guidance around the process.

What is a clean break financial order, and why does it matter?

This is where neither party can make future financial claims against one another. So if one party won the lottery or gain an inheritance, they can’t be taken back to court to potentially have to hand over a percentage of the funds. It means each person can move on without having to worry if maintenance will be paid. Thus courts try and avoid ongoing maintenance payments in favour of larger percentage of assets to allow for a clean break.

Can we agree our own financial settlement, or do we need a court order? 

An agreement can be made between two parties however it needs to be legally binding to avoid any future claims. A solicitor can draft a consent order, and it be submitted to the court, a judge would then approve it (if it is fair), once approved it becomes legally binding. I would advise both parties get legal advice before formulating an agreement, including where they have used a mediator. The process can be drawn out and take many months, years in some cases, it is important to not agree to the first offer, or 3rd or 4th, if this isn’t right for you and legally you are entitled to more. Many female clients unfortunately find themselves forced into signing agreements due to running out of funds or mental energy to fight any longer.

When in the divorce process should a woman speak to a financial adviser, and how do you find one who understands divorce?

Once both parties have disclosed their full financial position, a financial adviser/planner can start to pull together some scenarios which would allow the individual to understand what options are available. This can be done before full disclosure however it is often theoretical. With a clear scenario they can often discuss potential income requirements from a lump sum assets, mortgage affordability, shortfalls in budget requirements along with retirement income outcomes and any gaps that may be in place. This can support their case in court and support their overall outcome, providing longer term security after divorce.

Finding an adviser who understand divorce for a standard pension sharing order isn’t so much of an issue, however finding a financial planner who does is more important. The planning piece will mean the client can make better financial decisions and negotiate accordingly. Ask the planner what kind of scenarios they have built before and what kind of outcomes there were for the clients.