Pensions and divorce: are people missing out?

Since the implementation of the No-Fault Divorce in April 2022 there has been a substantial increase in people finalising their own divorce and financial settlement (commonly labelled as a DIY divorce) without obtaining legal advice.

A recent Which? survey surveyed 948 people who had divorced since April 2022 and found a staggering 71% hadn’t included pensions in their financial settlement on divorce. Ministry of Justice figures also show that applications for pension sharing orders are down 35% between the years 2017 and 2021 with many fearing the new divorce law will increase this. Worryingly alongside these statistics it was found almost one in five had not even considered the division of pensions, which more often or not is crucial to ensuring a person is receiving a fair share of the assets on divorce.

Many people only consider that the family home, car and savings are assets that need to be shared and will forget about their pensions because they are not a visible asset. However, a person’s pension is usually one of the most important and significant assets in a marriage. When we speak to clients to obtain information as to the assets in a marriage frequently the response will be ‘we have no assets’ but will go onto explain that they have worked for 20+ years contributing into a pension fund, meaning they have a significant financial asset for when they retire.

Disregarding pensions on divorce can negatively impact either party but generally those who are older, specifically women, will find they come out of a divorce with less than what they may have been entitled to. This will be owning to many factors but more commonly older women will tend to have smaller pensions due to lower incomes and spending time out of work to look after children. It is therefore crucial it is considered as part of financial disclosure and negotiations for anyone who wants a fair split.

You do not necessarily need to have a pension sharing order to ensure a fair settlement but it may be that a pension offset, where one person keeps their pension in exchange for giving up another asset, needs to be considered to ensure equality therefore you have all the financial information available to you before agreeing a settlement.

This demonstrates how important it is to obtain legal advice when trying to reach a financial settlement with your husband/wife to ensure you have obtained and considered all the pertinent information to avoid an unequal division of the assets and finding yourself in a position later down the line on retirement that you have inadequate pension savings.

Divorce is one of the most stressful and taxing times in a person’s life but not dealing with pensions can prove to be a huge mistake later down the line. It’s therefore important to get the right legal advice from the outset from experienced family lawyers. Our team of specialist practitioners of family law will be able to provide you with expert advice and support when reaching a settlement agreement which is fair and protects you in the best way possible.