Will divorce reform be coupled with financial fairness?

THE new ‘no fault’ divorce in six months has been widely welcomed. However, could the downside be rushed financial settlements, particularly over pension splitting, disadvantaging one spouse over the other?

Critics certainly fear that to be the case.

Under the old law, when seeking a divorce, the fastest method was to provide a reason why the marriage had broken down – adultery, unreasonable behaviour or desertion. Alternatively, you could apply for a divorce if separated for more than two years (should you both agree) or if separated for five (were one spouse to contest it).

Now, either or both parties can simply apply to the court for an order dissolving the marriage on the ground that it has broken down irretrievably. A conditional order for divorce, previously the ‘decree nisi’, can be applied for 20 weeks after this, and a final order, previously the ‘decree absolute’, can be sought after 26 weeks.

The Government said the changes would spare people the need to ‘play the blame game’.

Nevertheless, divorcing couples will still have to sort financial settlements in a separate and parallel process.

Former pensions minister Sir

Steve Webb, a partner at LCP, and barrister Rhys Taylor argue that couples looking for a swift divorce may receive unfair shares of their partner’s pension.

They said: “One group currently at high risk of retirement poverty is divorced women. In large part this is because relatively little attention is often given at the time of divorce to a financial settlement which gives proper weight to pension wealth.”

According to research by the firm, only around one third of divorces have any kind of financial order attached to them and not all of these will include pension orders.

Yet pension values can amount to more than the worth of the family home. Divorcing spouses may under-estimate the potential value of pension wealth.

For example, where one spouse has long service in a defined benefit pension scheme.

Divorcing couples may be looking for a swift exit, especially if attempts are being made not to escalate the temperature of poor relationships, and there may be little focus on areas such as pensions which can be complex and technical and require specialist knowledge.

In addition, the party with the lower level of pension wealth (usually the wife) may be more fixated on other priorities such as somewhere to live and financial security and support for children and may be less focused on ensuring that pension wealth is properly included in any settlement.

All of these are problems of the current system, and research indicates that divorced women often end up with very low levels of pension provision in retirement as a result.

Sir Steve and Mr Taylor caution: “The new divorce process could make matters worse.

“In some cases, a spouse may receive notice that a divorce application has been made just a few months before the court is asked to grant the first divorce order.

“They may be dismayed to discover that there is little or nothing they can do to stop or delay the process if the other partner is insistent on going ahead.

“They will have to deal with a range of practical issues including care of any children, impact on living arrangements and short-term financial support post-divorce.

“Against this backdrop, taking time to make sure pension rights are included in any settlement and properly valued may be a low priority.

“They may also be reluctant to raise pension issues for fear of being seen to be ‘obstructive’ or ‘difficult’, in a new system designed to reduce conflict and the need to prove fault.”