The top 3 financial challenges facing divorced women in 2024

Read about the top three financial challenges facing divorced women in 2024 and discover practical steps your clients could take to tackle them.

From the gender pay gap to low confidence in investing, some financial issues are disproportionately women’s challenges. 

As a divorce expert, it’s important to be aware that such gender equality issues in finance could be made worse by divorce.

Fortunately, there are steps your female clients could take to address these challenges and keep their financial plans on track.

Read on to discover the top three financial challenges facing divorcing women in 2024 and find out how your clients could mitigate them.

1. The gender pay gap

The gender pay gap measures the difference between the average earnings of men and women.

In 2023, the Office for National Statistics (ONS) reported that the gender pay gap stood at 14.3% across full- and part-time employees.

If your client takes time out of work or reduces their hours while caring for children, this could affect both their existing income and their long-term financial plans. For example, they may contribute less (or nothing) to their pension during these periods, which could result in a lower retirement income.

What’s more, divorce may exacerbate the effect of the gender pay gap on a woman’s financial situation.

Figures published by Legal & General have revealed that 24% of women struggle financially after divorce, compared to 18% of men. This may be due to several factors, including the disparity between men's and women’s earnings. Plus, if your female clients have custody of their children, they may need to reduce their working hours to take care of them, leading to a lower household income after divorce.

If your client is facing financial hardship post-divorce, there are several steps she could take to help her regain a sense of control and confidence, including creating a budget based on her new financial situation and building an emergency fund.

A financial planner can help your clients create a long-term plan that considers their new circumstances and aligns with their goals. 

2. Pension inequality in divorce settlements

As pensions are often one of the most valuable assets a divorcing couple holds, a woman who waives her right to these savings might be significantly depleting her potential retirement income.

Yet according to research conducted by the University of Manchester, only 12% of divorces involve some form of pension sharing arrangement.

This may represent a particular financial challenge for women – the same research found that in around half of couples, 90% of the pension wealth is held by one partner, usually the husband.

Furthermore, figures published in the 2024 NOW: Pensions gender pension gap report show that women retire on average with pension savings of £69,000 compared to £205,000 for men.

So, if your client is currently going through a divorce, it may benefit her to consider including pension sharing as part of her divorce settlement.

Alternatively, your already-divorced clients may benefit from reviewing their current pension contributions and overall pension wealth to determine whether their retirement plans are on track.

A financial planner can use cashflow modelling to help divorcing and divorced clients understand their retirement income needs. From there, a professional will create a plan for growing a client’s pension wealth in line with their desired retirement age.

3. The gender investment gap

Investing over the long term has the potential to help your clients achieve greater returns than they might receive from cash savings, which normally diminish over time due to inflation.

However, research published by the Harvard Business Review suggests that women are typically more risk-averse than men when it comes to investing. This lack of confidence could limit a woman’s opportunities to rebuild her wealth after divorce.

Your female clients could tackle this challenge by working with a financial planner who understands women’s needs.

By setting long-term goals, balancing risk, and developing investment strategies that align with your clients’ broader financial plans, a financial professional can help women to bridge the gender investment gap.

To learn more, read our in-depth insights into the gender investment gap.

Get in touch

If your female clients would like to create a financial plan that helps them to tackle the financial challenges presented by divorce, I can help.

Get in touch either by emailing lottie@truefinancialdesign.co.uk or calling 07824 554288.

As a new mummy, I will be on maternity leave until July 2024, so I appreciate your patience until I am back at my desk.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance. 

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.  

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. 

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

The Financial Conduct Authority does not regulate cashflow planning or tax planning.