Weekly Family Law Update January 10, 2024

Research reveals the reality of divorce finances for most

Every year around 100,000 couples get divorced in England and Wales.

And most of those divorces should involve important financial arrangements, which will affect the future of the parties and any dependent children.

But until now little has been known about those financial arrangements, and how the couples sort them out (if, indeed, they do sort them out).

Now new research has been published with the aim of helping to fill that knowledge gap, and perhaps help shape future developments in the law in this area. This is particularly timely, as the Law Commission is currently reviewing the law on sorting out finances following divorce.

The research project, which was led by the University of Bristol and funded by the Nuffield Foundation, involved a survey of 2,415 individuals who had divorced in the previous five years, to evaluate the extent to which they had achieved fair outcomes.

Modest assets

One of the most striking findings of the research was just how modest the assets of the average couple were.

It is easy to get the impression from the popular media that most divorces involve the division of substantial assets. But the majority of divorces reported in the media concern celebrities, many of whom are obviously much better off than the average person.

Contrary to that impression the research found that most couples had comparatively modest amounts of wealth on divorce. The median value of their total asset pool (including the net value of the home and any pensions) was only £135,000. About two thirds of couples had assets under £500,000, and nearly one in five had no assets at all.

Two-thirds of the divorcees in the survey did own their home, but a third of those had homes with a net value of less than £100,000.

Wives missing out

The fact that many couples had only modest assets appears to have encouraged them to save money by not instructing lawyers to sort out their finances.

The research found that only a third of divorcees made use of lawyers in relation to their financial arrangements, with nearly half of those who did not being deterred by fear of the cost.

But the amounts spent on lawyers by those who did instruct them were relatively low. A quarter of divorcees had had to find less than £1,000, with a further 18 per cent having costs between £1,000 and £2,999. Only nine per cent had costs of £10,000 or more, with higher costs associated with greater wealth.

Unsurprisingly the failure to take proper legal advice resulted in many receiving less than they were entitled to in the financial settlement.

The survey found that half of divorcees who had reached arrangements across all of their assets received less than £50,000, 21 per cent received less than £25,000, and 23 per cent ended up with nothing or only debts.

But it is the area of pensions where the lack of legal advice had perhaps the worst effect. The survey found that only 11 per cent of divorcees shared a pension pot. The main reasons given for this were a general lack of interest in the pension, and a strong sense that it ‘belonged’ to the spouse who had been contributing to it.

But in most cases the spouse who had made the most pension contributions was the husband, meaning that many wives were likely to have missed out upon substantial pension entitlements.

In general the research found that, up to five years after their divorce, female divorcees, particularly mothers and those in older age, tended to be worse off than men, even where they had re-partnered.

Should equal sharing be the default?

As mentioned above, the research aims to inform future developments in the law.

One proposed development involves the introduction of a default position whereby the net value of the matrimonial assets shall be taken to be shared fairly between the parties when it is shared equally, save in certain limited circumstances.

This proposal is contained in the Divorce (Financial Provision) Bill, a private members’ Bill sponsored by Baroness Deech, a former non-executive board member at the Law Commission and an expert in family law.

Such a proposal appears to have its merits, in that it could obviously help to ensure that divorcees do not miss out upon their entitlement.

However, lead author of the research Emma Hitchings, Professor of Family Law at the University of Bristol, sounded a note of caution, saying: “Although such a proposal might appear simple to introduce, equal sharing would not deliver a fair outcome for many couples with not much to share and very different priorities to those of very wealthy divorcees, such as providing a home for children from the relationship. Maintaining a discretionary approach and introducing a way of factoring in pensions are therefore key considerations for future reform.”