Empowering women to access legal advice and financial support during separation will help protect their economic futures.
By the time I was in my early 40s, I was stunned to realise more than 30 of my friends had been through a separation. For most, their experience wasn’t good. Most felt at sea, uncertain about their rights and where to turn for support. They were often just happy to get through another day, keeping their head above water as they lived through one of the most challenging and traumatic experiences anyone ever faces.
If you haven’t experienced this, you probably know people who have. Over 200,000 Australians are impacted by divorce and separation each year. Not only is it one of life’s most stressful and complicated events – for many women who don’t get the proper guidance, it can have an adverse material impact that they will feel for the rest of their lives.
Questioning the state of separation
After hearing so many moving stories, I wondered why—when you’re most vulnerable, and your world’s been turned upside down—the process of separating is so hard to figure out? As more of my friends and family wrestled with the anxiety and confusion of separation, I was motivated to make this complex process easier and less stressful for couples and families. I recognised that my experience building human-centred digital processes for other areas of life could help people navigate this one too.
In 2019, driven by a mission to lower the costs and impacts of divorce and separation in Australia, we launched a comprehensive online guide that provides education, support and connection to professionals. Almost four years later, we’ve learned a lot about the state of separation in Australia. I wish I could report that things have improved for women. Unfortunately, some of our most recent research suggests that, for many women, it has become worse – mainly when they have not had early access to education to help them navigate this difficult time.
Women, you’re vulnerable
It is common for women to be financially disadvantaged by divorce and separation. This disadvantage often occurs when they avoid professional financial or legal advice, doing so to keep things amicable. But many women feel unprepared to navigate their financial separation – to understand their assets, where to find them and to know what some financial terms mean. They can feel paralysed.
We’ve found that 75 per cent of women, compared to 65 per cent of men, don’t trust their partner to be honest about all the finances in the relationship. When a woman is unclear about her relationship’s financial assets and liabilities, she may accept an unfair settlement and risk economic difficulties later in life.
As women, we feel less prepared for our post-separation financial futures than men. Encouragingly, our data shows that more women than men seek financial advice early in their separation journey, with almost 50% of women telling us they want to know about planning their financial future and women making up 90% of those booking a free introductory session through us with a financial advisor. Read our full research here.
The regulatory framework financial advisors work within in Australia doesn’t necessarily support the needs of women whose primary goal is to expand their financial literacy and confidence. These women want to understand where the money is in their relationship and how to budget for their new life, and we see a clear opportunity for female-focused financial education and coaching services.
Sharing the marital pool
Men, by and large, accumulate higher superannuation balances than women. We know this is because women tend to provide child-raising and caregiving roles which, in turn, diminishes their career and earning trajectories. On average, women in their mid-forties (the most common time for separation) have a super balance of only 76.5% of a male at the same age.
According to a 2007 Australian Institute of Family Studies report, divorced men who remarried had a staggering 113% more superannuation than divorced women who were single at retirement. These men and women had divorced before 2002 when the Family Law Act deemed superannuation a divisible property within the marital asset pool.
Although the law now includes superannuation, it can be overlooked (intentionally or by mistake) during a couple’s separation. A lawyer must draft the legally binding agreement to distribute superannuation upon separation. As a result, people settling their assets without legal representation—to keep costs down and avoid conflict—can’t negotiate or obtain a fair superannuation split. This is of concern, as superannuation is the second-largest asset many couples hold outside their home.
The retirement time bomb
People ineligible for legal aid or who can’t pay for legal representation when they separate won’t have the professional advice or support to secure their full entitlement. For example, a primary caregiver who accepts a seemingly ‘fair’ 50:50 separation split without legal guidance may not receive their lawful share of marital assets.
As time marches on from their separation, this unfair settlement can adversely affect their long-term wealth. The superannuation ‘time bomb’ doesn’t release its financial damage until retirement. That’s why we see such high rates of divorced women in financial poverty, just one of the many unrealised societal impacts of separation.
Women who receive an unfair distribution are more likely to become homeless and rely on government support later in life. This concerns society as their retirement funds would have supported them had they received the correct asset allocation upon separating.
Empowering financial confidence
We’re concerned about women’s long-term financial disadvantage if they settle their separation without legal or financial advice.
Our nature as women—to care for our family’s welfare and seek peaceful outcomes over conflict situations—often makes it challenging to negotiate a truly fair settlement that doesn’t hobble our financial future. Therefore, we propose granting people early access to superannuation to pay for legal representation and financial advice during divorce and separation. Engaging these vital services—when they offer the best outcomes—would reduce the risk of economic poverty in the future.
In addition, we recommend to the government, legal professionals and superannuation funds to prioritise financial education for women, simplify financial disclosure, and provide separation coaching services.
Empowering financial confidence through better access to legal support will be crucial in ending the poverty and homelessness many separated and divorced Australian women face later in life.