Delay your divorce and win a pension

Jean Eaglesham, in the third of a series on women and financial services, looks at retirement

MOST women planning on getting divorced should wait until April before making the decree absolute, and so benefit from a legal change allowing them a share of their former husbands' pensions.

Not all new year resolutions are as time-sensitive as this advice from the Solicitors Family Law Association. Nevertheless, the new year is a good time to review your finances. It is also particularly important for women, given that only around one in five (as opposed to more than a half of men) have adequate savings and insurance cover, according to Mintel, the market research company.

In our increasingly insecure times, experts recommend that women try to attain at least some financial independence. Main considerations:

q Check your retirement provision.

Finding out how much the state will pay you in retirement is "one of the easiest and most useful financial health checks for women - and it's free," according to Helen Bath, a partner in the Cheltenham firm of independent advisers, Womanwise. By sending off form BR19, available from Department of Social Security offices or from good independent advisers, women can find out their current entitlements for basic and earnings-related state pensions (the latter often being referred to as the Serps pension). Similarly, you can check with current and past employers or with insurers to find how much you can expect to get from any other pension schemes.

In many cases, the figures will be low. Already, four times as many women as men claim income support in retirement, and this figure is likely to rise as the state retirement age for women is raised to 65 and the level of the state pension is cut back.

It is dangerous to rely on your husband to make up any shortfall. If you do get divorced then, even after the change in the law that comes in next April, you will only be entitled to a share in a former spouse's company pension after he retires - and if he has died in the meantime, or cannot be traced, you will get nothing.

To complete a gloomy picture, taking a career break to bring up children in your twenties or thirties "makes an inordinate dent" in your pension prospects, warns Craig Foreman of Touche Ross, the independent advisers. That is because the younger you are when you make (or miss) a given pension contribution, the greater the effect it has on your eventual retirement income.

q Make the most use of your pension options.

The simple answer to pension underprovision is to contribute more, provided, of course, that you can afford it. All pensions are a highly tax-efficient way of saving, and the earlier you start the better. Costs spiral as you get older because your money has less time to build up.

The first step is to check what pension options are open to you. Many part-time workers are now eligible to join company schemes. This follows a European Court ruling, backed by a recent industrial tribunal, that employers who bar part-time employees could be guilty of indirect sex discrimination - more than six times as many women as men work part-time. These rulings also mean that thousands of women, previously excluded from their employers' schemes, are entitled to buy back pension entitlements from previous years.

If you can join an employer's scheme it often pays to do so, even if you are only working a few hours a week, since that way you benefit from your employer's pension contributions as well as your own. With some schemes, however, this will not be viable. It is worth getting independent advice before making a final decision - IFA Promotions (0117 9711177) can send a list of three advisers in your local area, although it does not guarantee the quality of the advice.

q Review other savings.

According to the investment industry trade organisations women are starting to venture from the safe haven of building society savings accounts, but they still tend to be vastly outnumbered by men when it comes to buying stock market investments such as unit and investment trusts.

They are, in general, missing out as a result. Although it makes sense to keep some money in a deposit account as an emergency fund, such accounts are poor value for any savings that you can afford to tie up for a few years. Historically shares have easily outperformed cash deposits over the longer term.

q Check whether you have enough insurance.

If you have children, or indeed anyone else, financially dependent on you, it is essential to have life insurance.

Fortunately, the days are long gone when one leading insurer made a virtue of selling a "wife insurance" policy, which paid a lump sum to a man if his wife died. The policy's name was intended to differentiate it from normal life insurance, which protected the valuable life of the man only.

The insurance industry is now starting to wake up to the fact that many women need life insurance cover. To some extent women have the last laugh, in that their longer life-expectancy is reflected in cheaper life insurance premiums.

q Jean Eaglesham writes for 'Investors Chronicle'.