6th April 2025 will mark the 3 year anniversary of the implementation of no-fault divorce in England and Wales which was introduced to support separating couples in obtaining a divorce with the aim of reducing conflict. With no-fault divorce having made the divorce process somewhat more straight-forward, there must be increased emphasis on the importance of obtaining a Financial Order.
Unfortunately, there is a general lack of awareness amongst divorcing couples in respect of the importance of reaching a financial settlement in divorce proceedings and what can be included in such a settlement.
For that reason, our family lawyers provide some guidance as to why it is crucial for divorcing couples to agree and formalise financial arrangements upon divorce.
Reaching a financial settlement
Recent figures show that two-thirds of the divorcing population do not obtain a Financial Order, which is a legally binding document that outlines how financial issues arising from the breakdown of the marriage will be resolved. It is understandable that many separating couples want to start the divorce process and part ways as soon as possible. This can often result in couples overlooking financial issues.
It is important to be aware that if you do not obtain a Financial Order, aside for in very specific circumstances, both spouses’ financial claims against each other remain open regardless of the amount of time that has elapsed since the divorce itself. This means that your assets including inheritances, the fruits of business success and increases in value of property will be valued at the same time the claim is made and not at their value when the marriage broke down.
Financial Orders can be obtained by consent following discussions between parties and/or negotiations through solicitors, or with the Court’s assistance where it is not possible to agree. It specifies how assets, income and pensions will be divided fairly between both spouses. Having such an Order legally guarantees financial certainty for both parties once the divorce is finalised.
Many believe that obtaining a Financial Order is costly and some divorcing couples believe it is not worth obtaining such an order with having little or no assets. Caselaw highlights the importance of securing a Financial Order as soon as possible on divorce and demonstrates the potential consequences in the absence of a Financial Order.
Are pensions included in a financial settlement?
The matrimonial home is often the sole focus of divorcing couples when it comes down to considering what assets of the marriage are the most valuable. With that being said, without advice and guidance many fail to recognise that pensions can also be one of the most valuable assets of a marriage, with pensions comprising of almost half of the household wealth in divorcing couples.
The Great British Retirement Survey found that almost 1 in 2 couples did not know that their pension could be included as a part of their divorce settlement and a further study found that only 1 in 10 divorced people with a pension yet to be drawn made pension-sharing arrangements. Many mistakenly believe that sharing pensions ties divorced spouses together which could be a contributing factor as to why pensions are overlooked when negotiating a financial settlement.
The above statistics highlight the importance of raising awareness as to what should be considered as part of a financial settlement.
Raising awareness is crucial for the following reasons:-
Promoting a fair division of assets. Awareness encourages a full and balanced approach upon dividing assets.
Minimising conflict. Understanding the elements involved can help couples reach a mutually agreeable settlement.
Promoting financial security for both parties. Obtaining a Financial Order enables both spouses to have financial certainty and security upon divorce.
Contact us
If you are considering divorce and require advice on the financial arrangements you should be making, contact us here and book in your free 30-minute initial consultation with a family lawyer.