Divorce financial advice - from Women's Wealth - Independent Financial Advisers

Divorce – Financial and Pension Advice Guide

So just to cheer ourselves up after a generally washout summer, during which The Lionesses didn’t win the World Cup (although, to be fair they did brilliantly to get to the Final); interest rates continued their ascent – making the cost of living crisis even more excruciating for many; the chaos surrounding Asylum seekers perpetuated in the UK and I daren’t even look at what’s going on with Russia/Ukraine or turn across the pond with a potential second Trumpian presidency gathering momentum – let’s talk about Divorce.

Divorce. If you’ve been through it, or are going through it then you will understand the description of Divorce being akin to open heart surgery, but without the anaesthetic. It is a time when we are particularly vulnerable, both emotionally and financially. It is easy to put the emphasis on the former and neglect the latter in the storm that rages.

How many people Divorce?

Let’s look at a few statistics. In the UK the divorce rate at around 42%, has been slowly decreasing  since 2000, maybe because there is now less pressure on people to marry, with the general acceptance of cohabitation and relationships other than the monogamous heterosexual couple. The most common age for divorce is between 40 and 44, with an average of 62% of divorces petitioned by women.

Divorces tend to rise in recessions due to the extra strain on families during difficult financial conditions. The age of marriage has increased in the last 40 years, it is now much more common for men and women to tie the knot in their 30s following commitment to education and starting a career. So it would seem that people are making more mature decisions about committing to marriage and that they are likely to be in a more stable financial situation if they do decide to say ‘I do’.

Second marriages, which are increasing in number, have a higher chance of success with increased affluence cited as a major reason why these relationships survive. The message in these statistics is that carefully planned finances certainly play a part in the success of a relationship.

We must not forget civil partnerships. A civil partnership is a legal relationship entered into by two people which is registered and provides a couple with the same legal rights and duties that they have in a lawful marriage and has a very similar legal position as a marriage. The dissolution of a civil partnership, like a divorce, is dealt with by a court.

How long will it take?

Even a straightforward divorce or a civil partnership takes a minimum of 6 months to fully dissolve including the obligatory ‘cooling off period’. The end result is a court order – the Final Order – which dissolves the marriage.  Since 2022 a new law on ‘no-fault divorce’ was introduced in the UK. Which means that couples no longer have to rely on one of five facts  (adultery, unreasonable behaviour, 2-year separation with consent, 5-year separation without consent, desertion) to justify the ground for divorce.

Whilst this will hopefully reduce the emotional stress surrounding divorce, teasing out the financial aspects of divorce still remain the same. Obviously every divorce is different and this is not the place to discuss or analyse the possible  reasons a marriage breaks down – fascinating though it is. Suffice to say it is generally, not a ‘guns at dawn’ affair, most people divorce because they are simply unhappy.

The Divorce Process

  1. Appoint a solicitor – once the decision has been made to end the marriage it is advisable to appoint  a solicitor to negotiate a settlement.  ‘Kitchen table’ settlements – amicably agreed  – should also be formalised by the solicitor.  Where children are involved the tensions and emotions can be heightened and there are also financial implications surrounding maintenance to be considered.
  2. Consider the financial implications.  This is something best discussed with a Financial Advisor. To ensure that assets are split fairly between parties, their value must first be evaluated. This includes property, savings, businesses, pensions and more. Assets such as pensions can be worth more than they appear and an independent valuation is likely to be necessary. You will need to obtain a calculation of the value of all the pensions and then the options for those pensions will need to be professionally assessed by a qualified advisor. 
  3. The Court formalises the Divorce.  You can avoid going to court if both parties agree on how to split the money and property, but to make the agreement legally binding you would still need to apply to the court for a ‘consent order’ (a ‘qualifying agreement’ in Scotland). If you can’t agree then the court can be asked to make a ‘financial order’

How much will a divorce cost?

The average cost of a divorce is £14500 in the UK. Legal aid was withdrawn from most aspects of family law in 2013, so fees relating to divorce will have to be found privately, but there may be assistance if you are at risk of homelessness, a victim of domestic abuse or using the aid for mediation purposes.  Ask your solicitor for an estimate of the legal costs so that you know what you are dealing with.

Important facts about Pensions in Separation and divorce

Pension Rights on Separation

  1. If you separate without legally divorcing or dissolving your civil partnership you will not be able to formally share your partner’s pension, but you might still be entitled to a spouse’s pension or lump sum when they die. 
  2. If you are not married or in a civil partnership you are not automatically entitled to a share of the other’s pension. Co-habiting couples do not have the same legal protection as a married/CP couple.
  3. In England, Wales and Northern Ireland, the courts take into account the total value of all pension rights regardless of when they were built up. In Scotland only the value of the pensions built up during the marriage or Civil Partnership are taken into account , this means that in Scotland only anything built up before the marriage C/P or after the date of separation doesn’t normally count.

Dealing with Pensions and Rights on Divorce

  1. Pension Offsetting.  The value of pensions is offset against other assets, e.g. one person might get a bigger share of the family home, in return for the other person keeping their pension. This can offer a clean break without disturbing pension pots.
  2. Pension sharing – all or a percentage share of one person’s pension A is transferred to the other B. It can be transferred into a pension in B’s name or B may be able to join the existing pension scheme of A. This is dependent upon the pension’s rules and needs expert advice.
  3. Pension attachment/earmarking orders -person A agrees to pay a portion of their pension to B when A starts to take their pension. B cannot receive any pension until A decides to draw (In Scotland you can only get some of the lump sum). This does not offer the clean break of the other solutions. As person A is still in control until retirement.

The Court will make a Pension Order as part of the Divorce . A pensions specialist can guide you through the options, what you need to think about and offer regulated advice and organise a valuation of the pensions.

The new State Pension (since 2016) cannot be shared when a marriage or civil partnership ends.

The Decree Absolute means your marriage has been legally dissolved, but this does not mean that you are no longer financially linked to your ex.

The Financial Implications of the Decree Absolute 

You have gone through the heartache, the discussions about the children, the splitting up of the family assets, the court procedures and you finally reach D DAY. But……..the pronouncement of the Decree Absolute does not mean that you have a financial clean break from your spouse. The Decree Absolute means your marriage has been legally dissolved, but this does not mean that you are no longer financially linked to your ex.

An agreement made without court approval is not legally binding unless any agreement has been approved by you may make an application to the court at any time in the future to resolve the financial agreement if you later decide that you are unhappy with the situation. And do not assume that it is always the ex husband who is in the driving seat, there are many wealthy women who have supported their husbands who could get caught in this trap at a later date.

The Importance of Financial Advice in Divorce.

But in the end, everyone is different and will approach divorce in their own way. It is hard to be dispassionate. You will all know couples who have divorced – maybe you are one of the statistics yourself. Consider the horror of these real-life extremes:

  1. One friend was devastated that the family that she had nourished and cherished for over twenty years had disintegrated, despite the fact that she acknowledged that the relationship had broken down irretrievably on both sides. But she couldn’t bear to go to a solicitor or address the issues. She just wanted it all to go away and therefore she did not negotiate a fair settlement. In holding her head up high (aka head in the sand) she tried to maintain an amicable friendship post-divorce with her high-earning, high-spending, classic-car-loving, holiday-oholic ex-husband. Years later this lower-earning woman who had compromised her own career to devote time to the family, is actually still passively supporting this ex-husband as he remains in a jointly-mortgaged house as he is unable to get a mortgage as a result of his high-spending life as a newly single man (and the cynical would say, that some of his income was hidden in case she sought a financial settlement, thus compromising a mortgage application).
  2. Another culprit is a highly successful top lawyer with £10m in the bank, a Knightsbridge property, a Surrey gated mansion and mega-pension. The marriage has irretrievably broken down, but he refuses to divorce his wife who he keeps like a puppet controlling her spending on his credit cards, because he is petrified of the amount of money that she could potentially  receive in a settlement. He lives an extremely bizarre and frugal life but will end up with his huge estate going to this wife anyway – if she outlives him  – or to his estranged son.
  3. Another is a high earning accountant. On uncovering her husband’s affair she secretly assessed their joint finances. Then she called him in for ‘a meeting’ , handed him the evidence that he had accumulated along with the keys to one of their properties and told him that he is now out of her life and that this property is his non negotiable share of their assets – DISMISSED.

What was absent from all of these cases and which could have made an enormous difference is that despite these people being intelligent professionals they thought they knew better and did not take PROFESSIONAL FINANCIAL AND LEGAL ADVICE and please be aware that it is not too late to rectify this even if you have been in one of these financial lockdowns for some considerable time.

To protect yourself the first thing to do on deciding to divorce is to put your professional support team in place, i.e. your Solicitor and your Financial Advisor.

This failing to accept reality is summed up very nicely in the 2022 scene from The Split. This is a great drama series following the Defoes, a family of sisters working as divorce lawyers written by Abu Morgan and starring the brilliant actress Nicola Walker as the eldest sister Hannah. Hannah is a top divorce lawyer who herself is getting a divorce from her also lawyer husband Nathan (played by Stephen Mangan) after her long standing affair with a colleague is uncovered.

As divorce lawyers, they should be experts, but when the divorce papers arrive for Hannah to sign, she can’t bear to do it. She looks at them and puts them back in the envelope and places them in a drawer for another time. This happens again and again. Such is the pain of the finality of killing a marriage she cannot bear to sign the agreement.

To protect yourself the first thing to do on deciding to divorce is to put your professional support team in place, i.e. your Solicitor and your Financial Advisor.

Where to go to for Advice on Divorce and Pensions

  1. Find a solicitor who specialised in divorce who will draw- up the agreements and give overall advice  (www.lawsociety.org.uk/find-a-solicitor)
  2. Consult or appoint a Financial Advisor to guide you through the financial aspects (Women’s Wealth are independent financial advisors)

Other helpful addresses/Organisations









www.nationaldomesticviolencehelpline.org.uk (24 hour helpline 0800 200 0247)

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