Partner Tasha Bevan-Stewart, in our Family Law team, discusses the impact of cost of living pressures on divorce and how it is important not to forget about pensions when dividing assets.
New research from Legal & General shows that couples' ability to progress their divorces can be added to the long list of areas impacted by inflation and the cost of living crisis.
More than 270,000 divorces have been delayed because of the cost-of-living crisis, with financial pressures cited as delaying 19% of divorces, according to Legal and General. Nearly half (48%) of divorcees saw their incomes shrink by around 31%, leaving them with an average of £9,700 less each year.
Once a couple decides to get divorced, one or both of them can institute a ‘no fault’ divorce through an online government portal – since 6 April 2022 there no longer has to be a ‘reason’ attached to your divorce.
As part of the divorce process, a couple should look at their finances and try and agree how assets, debts and income should be allocated between them. If they reach agreement, they can submit this order to court – known as a ‘consent order.’
But the research identified that too many divorcing couples still do not give adequate consideration to their financial arrangements on divorce, and often fail to seek legal and financial advice.
Legal and General said that 40% of divorcees believe the process ends up financially unfair and that one of the parties came out on top.
A total of 69% of people did not sign Clean Break Orders, leaving them open to a future claim from their former spouse.
There are worrying indications regarding pensions too. Even though the majority of divorcing couples are over 50, only 20% of divorcing couples think about their pensions when dividing assets.
Around 29% actively waive their rights to share in the value of marital pensions.
Pensions can often be the main asset in a divorce, sometimes lower in value than the family home but not always. It's important to consider all pensions available to both parties to the marriage, as most funds can usually be shared. A financial adviser, tax or pensions expert can advise on options and tax implications.
As ever, it is vital for a divorcing couple to take legal and financial advice, so that they don't lose out on financial provision for their future. Provision for minor children of the marriage is vital too.
It is really important to make sure both parties are provided for in retirement, especially when one party has been the primary earner and built up a pension, while the other – usually because they have taken on more family caring responsibilities – has not.
For further information or legal advice, please contact law@blandy.co.uk or call 0118 951 6800.
This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.
