DP550 The Pension Consequences of Divorce

Author(s): Hugh Davies, Heather Joshi
Publication Date: May 1991
Keyword(s): Divorce Settlement, Gender Relations, Marriage, Opportunity Cost of Children, Pensions
JEL(s): 826, 840, 914, 915
Programme Areas: Human Resources
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=550

Women's disadvantages on the labour market leave them financially vulnerable when divorced. The number of elderly divorced women is growing, but their pension prospects are poor. The paper outlines current British arrangements for pensions and their treatment in divorce, and explains the case for new law on pension splitting. Men's and women's lifetime earnings are simulated on the basis of econometric estimates, as are their pension entitlements under SERPS, Money Purchase and Final Salary Schemes. Pension splitting after divorce is also simulated. It does not invariably guarantee pension adequacy, nor necessarily compensate for the pension mothers forego to rear children. Better Basic Pension would do better.