“…wherever I lay my hat (that’s my home)…”, Marvin Gaye
For some people expatriation, or emigration, is an individual lifestyle project (personal, professional or both); for others it’s a family adventure. However, when that choice unexpectedly leads those concerned down the painful path of divorce or separation, a further major change in life, the complexity of regaining a personal and financial equilibrium can be very daunting.
With a growing trend towards global, even digital, nomadism, life projects (those imposed upon us as well as those we choose) now frequently combine multiple aspects such as divorce AND modified retirement planning AND moving residence from one country to another… with such increasingly international lifestyles, to make the best decisions for the specific circumstances, it’s essential to seek expert advice, not just in legal and personal terms but in financial terms too.
As in-depth research carried out by the OECD reveals, Switzerland has the second highest proportion of non-nationals amongst its population (approximately 25%). Logically other reports, such as the Mercer expat quality of living report, show Switzerland as a favourite destination for expats, a very cosmopolitan country. In parallel, statistics from the Swiss Federal Office of the Population indicate that the percentage of people divorcing in Switzerland who do not have Swiss nationality is disproportionately high compared to the local Swiss population; 41% of divorcees here are non-Swiss, the consequences are far-reaching as in some cases one spouse may no longer meet the residency criteria to remain in the country.
The taboos surrounding divorce, combined with the taboos regarding personal finances, make it very difficult for separating expats to know who to turn to for advice; with family and friends living in a different country the anguish experienced alone can be particularly isolating. During marriage considerable assets are accumulated for the long-term, yet divorce results in a sudden, often brutal, split and a total revision in plans; the situation may become conflictual and unsettling, or even extremely traumatising. Financial recovery may well take an additional five or ten years and the standard of living of both parties will almost certainly be impacted. If assets are held in multiple jurisdictions, then the considerable implication of experts will be required to untangle finances and share properties whilst trying to respect the interests of each person and still facilitate a fresh start for them both.
What is the paradox of “grey divorce”?
Although the divorce rate amongst younger adults has declined in the last few years, couples are increasingly divorcing later in life; the divorce rate for over-50-year-olds, known as “grey divorce”, is rising in most countries. In Switzerland in 2020 34% of women divorcees (45% of men) were aged 50 or more, compared to fewer than 9% of women (12% of men) in 1980; the total number of divorces in the country increased by 57% from 1980 to 2020, moreover 31% of divorces in Switzerland in 2020 concern marriages lasting 20 years or more.
The shift in demographics is evident; the average age at first marriage has increased across the OECD by about 6 years from 1990 to 2020. However, the increase in “grey divorce” reflects a disturbing reality; as people divorce later in life, after long marriages, the stakes are particularly high. One spouse may have become financially dependent; (re)gaining financial resilience will take more time yet the ex-spouses have fewer working years ahead to reorganise their impeding retirement.
What is the situation for expat divorcees in Switzerland?
Given that certain expats in Switzerland choose to divorce elsewhere, in the country where they married for example, the actual separation of expats in Switzerland is even higher than the 41% of divorcees revealed by the data. These divorcees face particularly stressful and challenging times with limited local support from family or friends.
The specificities of divorce in Switzerland include cantonal variations; as many expats discover, divorcing in a country where the final outcome will depend on a court ruling potentially splitting pension assets and sharing properties requires the future divorcee to be accompanied by a virtual team of experts able to anticipate each aspect and protect his/her best interests as far as possible.
In Switzerland, a country where, in the aim of achieving fiscal efficiency, mortgages often remain in place with very little amortisation, the frequency of “grey-divorce” results in many older divorcees requiring the advice of experts to restructure property loans and secure personalised solutions for long-term housing solutions given their new circumstances.
5 steps to (re)build financial resilience following separation
As an international divorcee, determining the best course of actions to face the change requires expert insight and support, no matter where your new life may take you. Covering the three key aspects of your personal finances (investments, loans and pension savings), here are 5 steps which will enable you to gain the serenity, resilience, and financial freedom necessary for your long-term happiness:
1. Assess the situation before finalising your separation
The first step is to explore the implications of separation for every aspect of your personal finances (marital regime, timing of the separation, potential legal costs, fiscality, savings, future income, impact on retirement, choice of where to live, child support requirements, necessary adjustments to your estate planning…). Each question you raise is an opportunity to gain clarity as you design the next chapter of your life, so the more questions you ask the better; each situation is unique, with its own specific solutions, so it’s essential to choose the experts who can help you navigate the most efficient course to build your new future. It’s often suggested that one learns much more about a “future-ex” spouse through divorce than during a marriage; it’s particularly true that this is a time when one has to take control financially and fully understand the choices (past, present and future) for savings accounts, mortgage management, pension savings, real-estate. If one partner was financially dependent during the marriage, divorce is an essential time to achieve financial freedom.
2. Plan your budget
With little visibility over the way your divorce may work out, or the time it may take, it’s difficult to organise your short-term budget let alone “guesstimate” the future. However, understanding your current living expenses and evaluating potential alternatives in the choices available to you (housing, expenditure, generating additional income…) will increase your inner strength for the inevitable negotiations, boost your confidence and protect your interests. In many cases, seeking insights on the subject from your financial advisor will be highly beneficial and enable you to make the best decisions.
3. Analyse the possibilities for your mortgage
Leaving or selling the family home can be a very sensitive issue, and a major source of conflict for many divorcees, particularly in Switzerland. The financial choice for property owners in this country is often to keep a mortgage in place long-term and to amortise little whilst interest rates are as low as they have been in recent years. This choice favours tax-efficient financial management and consequently the average debt held by households is often higher than in other countries. As a result of this, couples separating later in life, after long marriages, face the additional hurdle of restructuring this debt and trying to factor retirement plans into a seemingly inextricable equation. In these situations of “grey-divorce” a wealth-management expert can help identify potential solutions to restructure the mortgage; it’s beneficial to consult early in the process to avoid months or even years of conflict over the former family home. Real-estate issues are often a particularly sensitive topic at the heart of the tensions; once resolved, concessions can be made on other aspects enabling the ex-spouses to finally move on with their separate lives.
4. Review your retirement savings
For many busy internationals today it’s difficult to find the time to consult the best experts to plan your financial future long-term and think ahead to retirement. A change such as divorce is a major wake-up call for you to protect your assets and really get your money working for you and your family before it’s too late. When coming through divorce in Switzerland, including notably the split of 2nd pillar pension assets which are often the most significant, yet the most ill-considered, part of savings, it’s often a pertinent time to carry out some financial planning and assess ways to rebuild retirement savings through a new strategy for tax-efficient buy-back after the divorce or through the opening of a “compte de libre passage” (vested benefit account). The financing of new life choices such as international mobility or entrepreneurial projects may also be analysed in this context with the input of financial experts.
5. Redefine your investment strategy
According to the Chartered Insurance Institute, the average divorced woman has less than 30% of the pension wealth of the average divorced man: for those who separate after cohabitation without marriage the risk of exposure to financial hardship is particularly high. Beyond the impact of the divorce itself, building a new life can also be challenging; a 2012 report from the U.S. Government Accountability Office, shows that after divorce, the household income of women fell by 41 % on average, almost double the loss experienced by men. Financial planning will enable you to assess future income and outgoings, plan management of capital, employment possibilities, taxation and saving needs so that you may adopt a resilient financial structure for the years to come.
Renewed hope for the future
The tensions exacerbated during the Covid pandemic have caused family units to face unprecedented challenges; inevitably many couples consequently face separation. More than ever before each individual must decide the solution that is the best for his/her life and be prepared to adapt to change at any time; single or as part of a couple, married or not… We face maybe more choices than ever before, the pace of change seemingly accelerates, the possibilities for our wealth management are vast, the need for optimal structuring and consistent returns is more present.
Exploring the questions relevant to your specific situation will help you to start working through each piece of the puzzle; you’ll take control of your choices for your future life and avoid any pitfalls.
As the writer George Bernard Shaw once suggested… “Progress is impossible without change, and those who cannot change their minds cannot change anything”. Facing divorce is very much about accepting change and orienting fresh decisions to start a new chapter in life on every level; personally, financially, and sometimes even professionally too. The almost total “reboot” of daily life after divorce will help you, in time, find greater resilience in both financial and personal terms. Many divorces feel energised by the new choices available to them; on a financial level the support of your wealth advisor will enable you to redesign and restructure your assets to support your new projects; just as you visit your Doctor for a medical check-up to ensure that you’re physically fit to face change, so our teams offer a financial check-up to rebuild, develop and protect your wealth for the new chapters of the life you choose to write.
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