Pensions and divorce - what you need to know

UK courts have allowed pension sharing orders since 2000, yet only 7 out of 10 divorces in a recent Which? survey included pensions in their settlements.

Divorces generally focus on a split of physical assets, such as property, savings, and investments but pensions are often considered by couples as ‘belonging to their ex’. They are sometimes the most valuable asset of the marriage and are also capable of sharing.

This can particularly affect women, especially older women, who perhaps have not worked throughout the marriage or have taken part-time roles with lower incomes whilst caring for children or older relatives. A recent report, conducted by a leading pension provider, found that there are over 3 million women in the UK locked out of a workplace pension as they don’t meet the minimum earnings threshold. So even if both parties have worked throughout their marriage their pension funds may be completely different.

The Which? survey also reports that pension sharing orders have fallen 35% since 2017 from 36,202 to 23,622 in 2021, with 22% of the ex-spouses surveyed simply not wanting to share their pension.

Even when pension pots are included in settlements the perceived value can be misleading.
Company pension schemes, especially those with defined benefits can be extremely valuable assets, and shouldn't be ‘off-set’ against the family home, even though it looks like the property is worth more.

The legal cost of divorce
Many divorcing couples are deterred from looking at all aspects of their finances because of the perceived legal costs involved. Some solicitors offer initial legal advice either free of charge or upon payment of a fixed fee. Negotiations to reach an agreed settlement and a consent order from the court are likely to be in the region of £3,000 plus VAT. Contested court proceedings can result in costs between £5,000 and £40,000 plus VAT.

This can sometimes lead to one party receiving expert advice whilst the other is trusting that their assessment of the division of assets is fair.

Family mediation - an alternative solution
At Poole Townsend we offer a mediation service. This is a non-confrontational route to resolving family separation with trained mediators assisting couples to work through the issues and find solutions in a neutral and impartial way. Mediation enables discussions to take place in a dignified manner. Both parties can confidentially and openly share their concerns and finalise the practical decisions required for divorcing or separating such as division of assets, savings, pensions, and arrangements for the children.

This process usually takes place over four mediation sessions with the mediator then preparing documents to record the decisions made. These are passed to a Family Solicitor to finalise the legal process.

On average the mediation process is across 4 x 90 minute sessions and can cost, including the preparation of documents, £1,100 plus VAT. This offers a considerable saving from solicitor-led negotiations and results in arrangements that have been reached by the couple rather than those imposed by a judge.

No fault divorces - has this made any difference?
Since April, the law allows for sole or joint applications for a divorce and no allegations of fault against the other person need to be stated. Divorces now take up to 6 months to complete and that period can be used very effectively to negotiate the arrangements for the financial settlement and the children through mediation.

More information about our mediation process can be found on our dedicated web pages. Alternatively, you can complete our online referral form and Angela, our Family Mediator can get in touch to arrange an initial assessment meeting.

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