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Why divorce reforms may put women at risk of financial hardship on retirement

Article Kindly Contributed By: Natalie Lester at Debenhams Ottaway.

The new divorce process and its emphasis on having an amicable divorce  has been welcomed by most family lawyers but it does have its downsides. For example, the new divorce process actually takes longer to complete than the old process due to a new 20 week cooling off period. Another potential downside  is the risk that people  who are looking for a swift and amicable divorce  may feel reluctant to consider complex assets, such as pension pots, for fear of being seen to be ‘obstructive’ or ‘difficult’, in a new system designed to reduce conflict  or they may simply overlook these assets because they don’t appreciate their value. Most good family lawyers will ensure that the finances are resolved in a constructive  manner and explain that it should not be seen as a battle or a fight .

In terms of assets that are at risk of being overlooked on divorce, pensions are probably the most cited example and it is a sad fact that it will be the weaker party, usually the woman in opposite sex marriages,  that tends to lose out due to lack of understanding of what is required to comfortably fund a retirement.

I am  concerned by recent Ministry of Justice figures that reveal  that applications for pension sharing orders fell by 35 per cent in the last four years to about 23,600, in spite of a 1.6 per cent increase in divorces between 2017 and 2020.  Some practitioners will argue that  no fault divorce is likely to make the problem worse because couples may rush to finalise their divorce without getting proper financial advice but the real issue is likely to be the changes to the way divorces have been filed since around 2018 which enabled couples to submit their own legal paperwork online. It has always been an issue that if both spouses do their own divorce and do not seek legal advice then they may not realise that a divorce on its own does not settle their financial affairs, it simply means they are no longer married. A legally binding financial settlement is almost always advisable in order to ensure that a former spouse cannot make a future claim and legal advice is almost always needed to draw up the agreement.

While the family law community has largely welcomed the no fault divorce regime on the grounds that it has made the divorce process simpler and less confrontational, it is imperative that divorcing couples are signposted to ensure they obtain professional advice in respect of resolving their finances. Pension sharing is a complex area and expert advice is almost always required and should be advised. This is especially the case for wives with children who often have lower levels of pension wealth and ,for obvious reasons, will often prioritise a home over a pension even when it is heavily mortgaged. With the cost of living crisis showing no signs of abating and more interest rate rises on the horizon, it has never been more important for divorcing couples to obtain professional advice and my worry as a  family lawyer is for those women who cannot afford to instruct a solicitor and thereby risk an impoverished retirement.

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