News and articles

Noone’s to blame

For financial professionals only

We last wrote about the pending ‘no-fault’ divorce law and Ending the Blame Game in August 2020.  Today, 18 months later, the Divorce, Dissolution & Separation Act 2020 finally comes into force (1) to allow couples in England and Wales to part ways without assigning blame.

As we predicted then, with more and more divorces taking place online,  it seems likely that the introduction of “no-fault” divorce will see this trend increase, and that means more people divorcing without accessing invaluable professional advice.

We don’t talk anymore

71% of divorcing couples fail to discuss pensions (2), and only 15% of divorces include a pension sharing (3) arrangement despite the fact that pension assets are likely to be one of the largest “pots” in marriage alongside the family home.

That’s why advice is so important.

As well as being a significant portion of wealth in a relationship, pensions are likely to reflect gender disparity in male/female couples. In 2021, the median pension wealth of married men was £53,000 compared to £10,000 for married women (2). Choices made as a couple –  say the wife taking a career break – are often the cause of this difference. If they separate, it can leave mothers at a significant disadvantage.

Where one partner has primary custody of the children, it may seem sensible for them to stay in the family home or have a larger proportion of the proceeds. However, if that partner is a woman, both options could leave her even worse off once the children have flown the nest.

Time for a change

Six out of 10 women don’t know they need to update their pension nominations when a relationship breaks down (4), so any wealth they do have may end up in the hands of an ex who outlives them.

With more amicable divorces, conversations about dividing the marital assets should become easier. As with women potentially missing out on £5bn in pensions annually (5), the more Financial Advisers are involved in those conversations, the better.

References

(1) https://www.gov.uk/government/news/blame-game-ends-as-no-fault-divorce-comes-into-force

(2) https://www.insuringwomensfutures.co.uk/wp-content/uploads/2021/05/Solving-Women%E2%80%99s-pension-deficit-interactive-web-May-2021.pdf

(3) https://www.stephensons.co.uk/site/blog/family-law-blog/pensions-and-divorce

(4) www.insuringwomensfutures.co.uk/uploads/2020/01/Manifesto-full-report-Pt2-2902-PRINT.pdf

(5) www.cii.co.uk/media/9224351/iwf_momentsthatmatter_full.pdf