Clickbait headlines anyone?

I honestly don’t know whether the headline “Majority of UK divorce settlements don’t consider pensions assets”  was a deliberate attempt to get eyes on the page or held any truth. It would seem very unlikely to be correct if it means we are to assume that solicitors specialising in divorce “don’t consider” a pension. What is more likely meant, is that most pensions don’t get split up as a result of divorce; in other words – there are other assets around to come to an agreement.

It won’t surprise you that after a house, a pension is most people’s largest and most valuable financial asset – which always makes me wonder why so few people get advice about theirs. The ONS has data on divorces in England and Wales that goes back to 1858 (there were 24!).

The reducing number of divorces is open to interpretation, with the most obvious being that fewer people are getting married. The chart below shows the gradual decline in marriages (of all forms) since the peak in 1972 of 426,241. The pandemic saw a decline, but interestingly, there wasn’t a ‘double-whammy’ to make up for this.

It has been said that the fastest way to lose a fortune is to divorce, and it is indeed almost certain that without proper consideration of all marital assets, divorce will be very costly. The data backs up the statement that women generally have smaller pensions by an average of around £53,000 (for a variety of reasons) and we are all aware that pensions can be complex. The two basic types are final salary (Defined Benefit) which are a promise of a future income based on salary and service, and an investment-based pension (Defined Contribution) which is “simply a matter of the pot size” though this reflects the amount paid in, charges, investment profile and success.

Despite the fact that it is surprising that only 11% of divorces in the last two years have had a pension attachment order, I don’t believe for a moment that the majority of solicitors ignore pension assets; rather it is the agreement on how these are split up that often surprises me. Many will see the value of a home in the very real present to be of greater value than an income in the future.

What I would urge divorcees and their legal representatives to consider is a proper financial plan – a model of cashflow requirements into the future. This may do much to take some of the pain and heat out of discussions; with all parties able to be realistic about what is possible.

Divorce may not be something that you feel is relevant to you, but perhaps someone you know is struggling with this or you have children who may need to carefully consider the financial implications of the marriage contract. It is widely reported in the media that January is the most popular month to start divorce proceedings; the suggestion being that having got through Christmas and the New Year, newfound resolve is apparent. In practice, March is generally the month that most petitions are started, maybe it’s something to do with the approach of the end of the tax year?

As ever, here to help.