How new divorce laws affect financial planning

7 April 2022

New divorce laws have come into force which potentially risk jeopardising people’s financial wellbeing. 

The launch of no-fault divorces in England and Wales means that one or both partners can file for divorce without having to give a reason or place blame.

Previously, one spouse was forced to make accusations about the other’s conduct, citing reasons such as ‘unreasonable behaviour’ before a divorce could be granted.

The change, which marks the biggest shake up in divorce law for more than half a century, follows a sustained campaign by family lawyers, who have argued that swifter, no-blame divorce will help people to move on more quickly and protect children. Importantly, it stops one partner from contesting a divorce and locking their spouse into an unhappy marriage.

However, experts have warned that the questions around wealth and the sharing of assets still need to be settled and this may take much longer than the 20-week period between application and conditional order of divorce.

Fiona Turner, partner at law firm Weightmans, said: “It’s important to remember that the divorce element only serves to officially end a marriage or civil partnership. It’s critical that couples realise that and still take all the necessary, additional steps to settle their money matters.

“There are lots of different avenues separating couples can take when it comes to finances. But whatever happens, full and frank conversations about the value of assets and income is key to achieve the best outcome. And all agreements will still need final court approval to ensure that they are legally binding and tie up any loose ends.”

Turner said that the relative ease offered by the no-fault could tempt couples to move through the process too quickly, compounded by the fact that some individuals may choose not to use legal representation to make their initial application, which could see couples divorce without considering the full ramifications.

Turner added: “Serious financial implications could inadvertently arise if a divorce is initiated without consideration of possible competing legal jurisdictions which would have a knock-on effect on the scope of a financial settlement. Similarly, if a divorce is concluded by a Final Order, before a financial order is put in place, this can cause challenges linked to occupation of the family home, pensions and insurance matters.”

Linda Wallace, director at Wesleyan Group, said women would need to be particularly careful in the splitting of assets.

“Factors such as property and savings are often front of mind but there are forgotten factors too. Chief amongst these are pensions. How each divorce case treats pension splits will be different and it can be complex to determine. For example, in some cases, the value of a pension will be offset against other assets meaning one partner would keep their pension and in return get more of something else.

“It’s essential that individuals consider pensions as a valuable asset and this is particularly the case for women. Research found that at least half of men who are married or cohabiting have at least 75% of the couple’s pension wealth.

“Not exploring formal settlement options can leave women significantly disadvantaged when it comes to their retirement funds.”

Professional Paraplanner