Winning by a split decision
DIVORCE laws in England and Wales are changing from today, allowing couples to split up without blaming each other for the breakdown of their marriage.
Lawyers say the new “no-fault divorce” system will be kinder to couples and their children, as pinning blame on one partner made splitting more acrimonious.
The reforms are the biggest shake up in 50 years and should make the system cheaper, quicker and simpler.
Yet it will not eliminate disputes over the division of financial assets, and women must make sure they get their fair share of any workplace or personal pensions, said April Ritchie, senior wealth management consultant at Mattioli Woods. “Pensions are often forgotten but can often be worth more than the family home,” she said.
There are three key ways to deal with pension splitting on divorce in England,Wales and Northern Ireland.
Married couples and civil partners can choose to “offset” the value of any pensions against other assets, such as property. Alternatively, they can divide them for a clean break, known as pension “sharing”.
The final option is “earmarking”, where a chunk of one partner’s pension pot is set aside to be paid later. This can be risky as the former spouse could lose income if they remarry, or the pension holder dies.
In Scotland, only the value of the pensions you built up during the marriage or civil partnership is considered. In England, Wales and Northern Ireland the total value of all pensions is taken into account.
Couples should consider separate legal and financial advice to make sure both get a fair settlement, said Menna Cule, financial planner at wealth manager Brewin Dolphin.
A financial adviser can help you draw up a list of assets and a list of your joint and individual outgoings. “That way your legal advice is based on accurate information.”
Cule said to cancel any financial commitments in joint names, including credit cards, joint accounts, loans and even overdrafts. “Most people know when a relationship is coming to an end, so start saving and planning for that moment.”
Hargreaves Lansdown senior personal finance analyst Sarah Coles said to beware of running up debts during the split: “If you’re both named on the mortgage, then you’re both liable for the full amount, so try to maintain payments in the short term.”
If your ex refuses to pay their share, or you are struggling to pay yours, the mortgage company may let you service just the interest for a period.
Stop fighting with your ex if you can, she advised: “Each niggle will cost a fortune in legal fees, but don’t be bullied into a poorer deal.
“If you have run up debts or spent your savings during the divorce, make paying them off and building up a cash safety net your priorities.”
If you are relying on maintenance payments, you need to insure the life of the person paying them, to protect your family, Coles added.
The divorce blame game may be over, but that won’t help if couples accuse each other of messing up each other’s finances.