Foreseeable Futures: Pension-Splitting And Divorce
Published on 20 May, 2022 | Suzanne Smales
Advances in science and technology in recent decades have generated considerable benefits for people living in the UK and across the rest of the world.
They not only include a better quality of life but the potential of a longer life too.
That much is clear from figures published last September by the Office for National Statistics (ONS) showing that males born in the UK in 2020 could expect to live 79 years, while life expectancy for their female counterparts is almost 83 years (https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/lifeexpectancies/bulletins/nationallifetablesunitedkingdom/2018to2020).
Those numbers represent an increase in life expectancy of a decade in the space of just half a century (https://www.macrotrends.net/countries/GBR/united-kingdom/life-expectancy).
It is a development which has serious repercussions for the country’s population. The ONS believes there will be an additional 7.5 million people aged 65 years and over within the next 50 years (https://www.ons.gov.uk/peoplepopulationandcommunity/populationandmigration/populationestimates/articles/overviewoftheukpopulation/january2021).
Such a scenario naturally prompts the question of how longer lives are going to be provided for.
According to research by the insurance company Aviva, private pensions now account for 42 per cent of the UK’s total household wealth of £15.2 trillion (https://www.aviva.com/newsroom/news-releases/2022/05/thousands-risk-pension-poverty-after-divorce/).
However, Aviva’s study also included a survey of 1,000 men and women who have been divorced. It concluded that many simply did not realise their pension could be affected by the end of a marriage
As a result, just over one-third of those questioned admitted having not made a claim on their former spouse’s pension (https://inews.co.uk/inews-lifestyle/money/many-divorcing-couples-still-not-splitting-their-pension-new-research-shows-1605989).
The data made me think about why that should be the case. After all, pensions should be a fairly obvious asset to consider for division upon divorce, given that they are quite often the largest asset after the marital home.
Last month, of course, saw the introduction of ‘no-fault’ divorce (https://www.legislation.gov.uk/ukpga/2020/11/contents/enacted).
Despite the passing of the Divorce, Dissolution and Separation Act of 2020, the financial remedy elements of the principal previous legislation – the 1973 Matrimonial Causes Act – remain in force.
They set out that among the “matters to which court is to have regard” when it comes to a financial settlement are the “needs, obligations and responsibilities” which spouses will have “in the foreseeable future” (https://www.legislation.gov.uk/ukpga/1973/18/section/25).
I would argue that whilst the requirement for an income from a pension may be some way into the future, having adequate provision building throughout someone’s lifetime is a ‘current’ as a well as a ‘foreseeable’ need and is particularly important given the ages to which individuals can now expect to live.
Ensuring adequate pension arrangements – above and beyond that provided by a state pension – should surely form an integral part of discussions about a divorce settlement.
That a blind spot has apparently developed in relation to pensions could perhaps be due to the number of individuals who now choose to handle the divorce process entirely themselves without seeking legal advice.
They have been more able to do so since the creation of an online divorce portal in 2018.
The Ministry of Justice disclosed last month that the system is now so popular that the three-quarters of all divorce petitions submitted last year were done digitally – an increase of 22 per cent in a year (https://www.gov.uk/government/statistics/family-court-statistics-quarterly-october-to-december-2021/family-court-statistics-quarterly-october-to-december-2021#divorce).
Technology and a change in the law are not the only things which have added much needed flexibility to the divorce process.
Myself and my colleagues at Hall Brown offer a range of methods – mediation, arbitration and collaborative law – which are collectively referred to as Alternative Dispute Resolution (or ADR, for short).
Their growing popularity bears testament to the desire of many couples to handle divorces and settle differences on other delicate family matters outside the courts.
ADR is less stressful and less expensive than a court hearing but it does still require the guidance of a skilled practitioner. I would suggest that legal input is particularly helpful when ensuring that a divorce settlement takes into account all available assets.
People can, of course, establish the terms of an agreement themselves but there are risks attached if they don’t take legal advice and there is no redress if errors are made.
An amicable, friction-free process should always be the objective of couple who divorce and it is eminently achievable but it shouldn’t leave either party at a disadvantage – straight away or in the future.
Given that divorce amounts to one of the most important episodes in many people’s lives, the consequences of any mistakes can be significant.
A divorce settlement is as important as buying a house. Whilst we can take care of all the details ourselves, we usually retain the services of a trained conveyancing solicitor to guarantee that all is in order and there are no nasty surprises once contracts have been exchanged.
As the Aviva study has shown, pensions are not only important but a relatively misunderstood element of many divorces. It makes good sense – indeed, I would go so far as to say that it’s a necessity – to seek the help of a skilled family lawyer in assessing how relevant pensions are to current and future needs.
The desire to avoid litigation and blame should not – and does not – mean that seeking legal advice to ensure the best provision for someone’s future should be forgone or forgotten.