‘No fault’ Divorce and Pensions

New ‘no fault’ divorce laws could adversely affect pension claims – how?

On Tuesday, we posted a blog about the Divorce, Dissolution and Separation Bill which the Houses of Commons had backed by a clear majority. Many can see the benefits of the ‘no fault divorce’, including those in the family law sphere and the general public. Why? Because it is hoped that by not having to cite the reasons for the divorce, separating couples can maintain amicable relations which will help them to resolve issues such as financial division and child arrangements without conflict or protracted litigation.

One sector, however, has shared their concerns about the Bill.

Pensions are often overlooked when parties decide to split the finances between themselves and have a ‘DIY divorce’. Now that divorces are becoming more accessible, with the introduction of the online divorce service and now the ‘no fault’ approach, financial experts are concerned that this problem will increase. This is because many practitioners expect there to be a rise in divorce rates as the country starts to move out of lockdown. It is anticipated that for some couples, the emotional impact of the pandemic generally as well as the more direct impact of the lockdown may cause them to question their relationship.

With divorce being at the end of their fingertips and an ‘easy route’ in terms of not having to establish key facts to rely on, lawyers and financial experts are worried that practical ease with which they can start the divorce may mean they overlook the importance of seeking specialist advice on their financial matters, particularly their pensions.

According to statistics published by the Pension Policy Institute, the average divorced woman has £26,100 in pension wealth. When compared with the averaged divorced man’s fund of £103,500, it is clear that women tend to ‘lose out’ in terms of pension provision. It is reported that the reason for this is because women tend to pay into their pension funds for less time as many will have career breaks whilst they care for their children and often, they reduce their working hours to part time.

Many separated couples who do not seek legal advice at the outset are unaware of their potential pension claims over their spouses’ fund. Equally, some underestimate the importance of dividing it and thinking ahead as to the future impact of the separation on retirement. There may be circumstances where ‘offsetting’ some of the pension provision is the right thing for a particular couple, but it should never be assumed that “you keep the £300,000 house and I’ll keep my £300,000 pension” is a fair and equitable settlement, just because they appear to have similar values.

It is frightening that only 13% of 116,612 divorces filed in 2019 contained some sort of pension settlement order. This is why it is so important to seek legal advice as soon as possible upon separating. Prevention is always better than cure and taking advice straight away can help you make the right choices about what steps you take, whist having regard to the legal impact of those choices.

If you are concerned about any of the issues raised above or anything else regarding divorce, financial or children matters arising from separation, you can contact us by email to info@family-law.co.uk or WhatsApp to 07725 115219. Alternatively, if you are able to call us then we would be more than happy to discuss matters with you over the telephone on 01625 544650.