2 November 2022
If you are covering the latest divorce statistics from the ONS, please see the following comment from David Gibb, chartered financial planner at Quilter:
"Over the long-term, the divorce rate in the UK continues to fall, but according to the ONS there were 113,505 divorces granted in England and Wales representing a 9.6% rise in divorces compared with 2020 when there were 103,592 divorces.
"Some of this rise will be attributed to a back log of cases in the family courts during the pandemic but some of this increase will also be down to the stress the pandemic and the lockdowns had on relationships.
"In April 2022, the UK introduced no-fault divorces and this may also produce a spike in the number of divorces as couples who have been waiting for the new law finally get on with their divorce. The impact of the cost of living crisis on finances will also produce fractures in relationships so we may see the number of divorces rise in the next few years.
"Although ‘DIY divorces’ were already possible before the introduction of no-fault divorces, the new legislation makes it easier for couples to apply for divorce without needing to apportion blame and can deal with the paperwork more easily themselves. While this is not a bad thing, couples need to avoid forgetting about one of the most valuable assets in divorce arrangements, which is a pension.
"It’s easy to forget about things like a pension or only focus on the assets that you can see in front of you, such as the family home or prized possessions, but many will misunderstand the impact of failing to split a pension at the time of divorce.
"When couples divorce it is important they note that there are different options for how they divide pension assets between them, including:
- Offsetting, where the pension assets can be offset against other assets of the divorcing parties. For example, one party many wish to stay in the marital home in lieu of receiving part of their ex-spouse’s pension rights.
- Pension sharing orders, where pension assets are divided at the time of divorce and there is a clean financial break.
- Pensions attachments orders, where the pension provider of one party pays an agreed amount direct to the former spouse when the pension rights come into payment. This does not represent a clean financial break between the couple and risks the loss of future income for the former spouse if the person with the pension rights dies before retiring or the former spouse remarries.
"Professional advice, both legal and financial, is crucial throughout the divorce process to ensure any settlement is fair for all parties involved. It should not be acceptable for pensions to be ignored, since they will have a major impact later in someone’s life."
