Do-it-yourself divorces soared and pension-splitting deals plummeted following legal reforms last year, new figures reveal.
New “no-fault” divorce legislation introduced last spring has made separation easier and faster, but critics say many ex-spouses could be worse off because of these trends.
There were nearly 70,000 online divorce applications in the first nine months of last year, compared to around 61,500 for the whole of 2021, according to recent official data obtained by law firm Nockolds.
Legal reforms: couples can now divorce within six months of the first application, even if one partner objects, and the process is largely online
Some 22% of divorce petitions included a pension-splitting order – the most common way to split pension pots – in the first nine months of last year.
This was the same proportion as for the whole of 2021, although the percentage fell by 33% in 2017 – see the chart below for the longer-term trend.
And Nockolds says it’s likely that many couples undertaking do-it-yourself divorces overlook pensions, potentially their biggest financial asset besides the family home.
Legal and financial experts warned ahead of the reforms that faster “no-fault” divorces could make it more difficult to fairly share financial assets such as pensions.
Couples can now divorce within six months of the first application, even if one partner objects, and the process is largely online – including serving divorce papers by email.
Ignoring retirement assets can be financially disastrous for someone with little or no foresight. If a spouse has built up even a modest end-of-career wage pension, chances are it’s worth more than the average UK home
Francesca Davey, lawyer at Nockolds
Financial settlements are always handled in a separate, parallel process that may continue once the divorce is final.
But a report by Pensions Minister Steve Webb and family law barrister Rhys Taylor predicted the new emphasis on haste meant divorced spouses could underestimate the value of pensions or prioritize issues such as child custody, property and more immediate financial security.
Divorced couples who don’t have a financial settlement can always go back and negotiate one later, but once there is, it’s almost always final, barring exceptional circumstances.
It’s not yet known how many DIY online divorces are being done without financial settlement — with or without pension splitting — because those numbers won’t be released until the spring, Nockolds says.
Therefore, it is possible that the increase in quick DIY divorces will eventually lead to more couples realizing belatedly that they still have to sort out their finances.
There are three main options when it comes to pensions in divorce – dividing them on a clean break basis in a pension division order; a partner assigning part of the income to be paid to a former spouse after retirement; and offset their value against other assets.
With the exception of 2019, the annual number has been on a downward trend – although we don’t have full data for 2022 yet.
Francesca Davey, senior partner in the family law team at Nockolds, says: “It’s easy to ignore financial remedies or seek inappropriate remedies when doing DIY divorce applications.
“Because a pension is usually in the name of a spouse and is associated with their employment, it is often incorrectly assumed that it is not divisible.
“Ignoring retirement assets can be financially disastrous for someone with little or no foresight. If a spouse has built up even a modest end-of-career salary pension, chances are it will be worth considerably more than the average UK home.
Equitable sharing of pensions in the event of divorce
A free anti-jargon guide launched by a legal charity helps couples share one of their most prized assets. Learn more here.
“While most people will have a good idea of what their home is worth, far fewer know what their spouse’s pension is worth, what their benefits are worth, or even how many pensions they have or who owns their fund, which leads to a distortion of priorities in the division of matrimonial property.
Nockolds believes that for many couples, a pension splitting order is the fairest way to distribute these assets, as they are split upon divorce and allow the recipient partner to pay a lump sum into their own pot or to start contributing to a new one.
However, he warns that many spouses undertaking do-it-yourself divorces make the mistake of opting for the usually lower “assignment” option, called a pension garnishment order.
“A pension garnishment order is risky unless the pension has already been taken, and it’s important to look at exactly what benefits the type of pension offers to avoid losing by choosing the wrong option,” says Davey.
She adds that the introduction of no-fault divorces on April 6 last year is already accelerating the trend of do-it-yourself divorces in which pension assets are overlooked.
“We are already seeing evidence that no-fault divorce accelerates rushed DIY divorces in which the plaintiff does not consider all of the financial remedies available to them.”
Nockolds points out that the decline in applications for pension-splitting orders comes despite increases in the total number of divorces and the average age of divorcees.
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Steve Webb, former Minister for Pensions and now a partner in financial consultancy LCP, said: ‘There was always a risk that more streamlined divorce proceedings could lead to more emphasis on quick resolution and less on matters more complex and difficult like taking pensions into account when reaching a divorce agreement. ‘
He adds of the Department of Justice data obtained by Nockolds: “These figures suggest that these concerns were well founded.
“There is a real risk that if people divorce without taking legal or financial advice, they will neglect pensions altogether or fail to see the true value of the pension wealth that each party has built up.
“The danger is that we will face increasing levels of retirement poverty among divorced women if this problem is not addressed.”
A Department of Justice spokesman said: ‘Our changes to divorce law have given couples more time to resolve their issues and a greater chance of doing so amicably.
“Our new online divorce system provides information on financial matters, including pensions, to support families through separate financial procedures.”
The government expected a temporary increase in divorce applications following divorce reforms last April, as people will have waited to apply under the new process. He predicts that the number will return to previous levels after an initial spike.
> What to consider if you get divorced: Find a five-point financial plan here
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