The new ‘no-fault’ divorce – should you wait to get the ball rolling…?

You may have heard that the government’s Divorce, Dissolution and Separation Act 2020, due to come into force in April 2022, will reform the divorce process to remove the concept of fault. The new legislation means that if both parties agree to a divorce, there won’t be a requirement for one party to blame the other for the breakdown of the marriage. It is intended to reduce conflict between parties, allowing couples to focus on the more important issues, such as their children, finances, and property. This change will also apply to civil partnership dissolution.

However, there are ways of starting divorce proceedings before the new legislation comes into effect in April 2022, without it being onerous on blame, so don’t fear that because the available grounds for divorce don’t currently include the label ‘no fault’, it means that you must go in with all guns blazing to get the divorce started.

Charlotte Gower, a member of our Family Law Team in Warwick, explains “Whilst the marriage must have irretrievably broken down in order for divorce proceedings to be started, there are currently five legally recognised reasons for the breakdown:

a. A party to the marriage has committed adultery and the other finds it intolerable to continue living together
b. A party has behaved in such a way that it would be unreasonable to expect the other to continue to live with the other spouse (“unreasonable behaviour”)
c. A party has deserted the other for a continuous period of two years or more.
d. The parties have lived separately for two years or more and the other spouse agrees to the proposed divorce
e. The parties have lived separately for five years or more, in which eventuality consent is not required

It is a common misconception that the Court will always take into account the reason for divorce, or the conduct of the parties, in making a financial Order. The basis for the divorce is not normally relevant to how financial matters are resolved. “Conduct”, as it is known, will only be considered if the Court considers it would be unfair to disregard it. So, even if the Petitioner uses, for example, ‘unreasonable behaviour’ for the ground for divorce, this does not usually have a bearing on the financial side of things.

If you want to separate or you are already separated and you want to sort out your financial separation, then you do need to have the divorce proceedings started in order to have your financial separation put into a legally binding Court Order and approved by the Court to formally finalise it. If you don’t get the agreement finalised in a Court Order, then you are leaving your claims against each other open.

We can draft the financial Court Order, called a ‘Consent Order’ for you after reviewing your wants and needs and potentially negotiating with the other party. This can then be filed with Court where a Judge will review and approve, so long as they believe it to be fair. You can do all of this by agreement without actually having to step foot inside a Court itself.

There are ways that the divorce can be achieved amicably without delay, and this means that you can go ahead and get your finances sorted and finalised sooner rather than later. We would recommend getting advice from one of our experienced Family Law Solicitors, where you will be able to discuss your divorce and financial separation and getting it all laid out in a Court Order, letting us guide you through the process and making it as stress-free as possible.”

For further information, please contact Charlotte Gower either by calling the Warwick Office or by emailing charlotte.gower@wadsworthslaw.co.uk.

 

Pension sharing in a divorce settlement

When couples separate and divorce, part of that process will involve dividing the assets from the marriage and creating two households out of one.

‘Dividing up cash, savings and the family home are relatively straightforward,’ says Rachel McLarney, family solicitor at Wadsworths Solicitors’ Warwick Office. ‘In contrast, pensions are the most complex asset to distribute, and can often be overlooked.’

Pensions can be shared just like any other marital asset. However, the share of the pension cannot usually be made available immediately, but will provide some pension benefit in the future. In addition, there are a variety of types of pension schemes with differing approaches to calculating the eventual pension payments.

One key difference arises depending on whether a scheme is based upon defined contributions, for example, a private pension into which a set amount per month is paid into the fund. Or a defined benefit scheme, for example, a final salary pension scheme), which is calculated by a formula based on the earnings history, years of service and age, rather than depending directly on individual investment returns.

Alternatively, experienced investors or company directors may have a Self-Invested Personal Pension (SIPP) or a Small Self-Administered Scheme (SSAS) which might include a portfolio of assets such as commercial property, woodland, shares and business investments.

It is perfectly possible for a couple to have pension funds of the same size but differing predicted monthly payments, even if they both work in the public sector.

Valuing the pension

The starting point is to contact your pension provider to request an up-to-date valuation of your pension or pensions – one is required for each pension you have. This is straightforward and a telephone call to your pension provider is usually sufficient. You will then receive a written valuation (or CEV) in respect of the pension, which says what the pension fund is currently worth and your expected pension payments. It can take some time to obtain this written valuation, which unfortunately can delay matters if parties are unaware.

For most private pensions, that valuation will usually be sufficient to provide accurate information to allow you to determine long-term arrangements. However, the picture is far from straightforward for SIPPs, SSASs and defined benefit public sector or armed forces pension schemes.

In these cases, the CEV may not be a true valuation of the pension fund. This is not because of anything untoward, it is simply to do with how the calculations are made, and the CEV provided may be lower than the actual value of the pension.

This can arise for a number of reasons, as demonstrated in the following scenarios:

• If the defined benefit is calculated based upon length of service of the serving spouse, the difference can be significant. For example, where the wife is a serving police officer who has 24 years and 364 days service, her pension provider says she has a CEV of £250,000. However, 24 hours later, when she has attained 25 years’ service, that pension may be worth £350,000.
• Where the pension fund includes property investments, values may change significantly particularly if planning permission for development is obtained. An acre of agricultural land may be worth £20,000 today, but with planning permission for a solar farm or a business park, its value could increase tenfold.

The benefit of an actuarial valuation

A pensions actuary will be able to provide an accurate valuation of the pension fund and expected payments. Unfortunately, an actuary’s report can be expensive, and often couples are put off by the cost and feel that the size of the pension does not justify the expense.

However, as can be seen in the example above, the true value of a pension can be significantly higher than you might initially be led to believe.

Can I claim against a pension that is already in payment?

Yes! Just because your spouse is already receiving their pension, it does not mean that the pension fund cannot be shared. However, it may be necessary to obtain an actuarial report to assist with calculating the appropriate percentage split.

What about state pensions?

It is possible in certain circumstances to have a pension sharing order against your spouse’s state pension – this might be particularly relevant if one party has not worked sufficiently to build up their NI contributions and so is not eligible for the full amount of the state pension.

Offsetting

In some cases, it might be preferable to keep the pension intact and provide one party with a larger capital sum.

For example, when one person earns little, they might struggle to raise a mortgage to buy a house. If the higher earner has a large pension pot, they might prefer to keep the whole of the pension and (subject to appropriate valuations) give their spouse more capital in exchange. This is known as offsetting; however, pensions and capital cannot be compared on a pound-for-pound basis.

As can be seen, pension calculations are complex, but your financial security in your old age may be at stake and so it is vitally important to seek legal advice from a solicitor who will be able to explain to you in more detail about how to share any pensions and how to obtain accurate valuations.

For further information, please contact either Rachel McLarney or Louise Dawson in the Family Team on 01926 493485 or email rachel.mclarney@wadsworthslaw.co.uk or louise.dawson@wadsworthslaw.co.uk.

Wadsworths; Helping you Find a Resolution!

We’re proud to announce that Wadsworths’ Family Department are now all members of the national organisation Resolution.

Members of resolution are family specialists who follow the Resolution code of practice, so clients can be confident that they will receive advice which takes account of their needs and those of the whole family, particularly the needs of any children.

Resolution members are committed to working towards reaching an agreement without conflict and the need for expensive court proceedings. We will advise you of all of the options available to you and your family, and we will guide you through the process of separation while ensuring that you are given the correct professional advice to suit your individual circumstances. It is important for clients to understand the long term financial consequences of decisions and we will be there to help you every step of the way.

As resolution lawyers, we offer an initial 1 hour meeting at a fixed fee of £75 (plus VAT). If you would like to arrange an appointment with a member of our family law department, please do not hesitate to contact Julie Haden or Zarah Alam on 0121 745 8550. If you wish to email please email either julie.haden@wadsworthslaw.co.uk or zarah.alam@wadsworthslaw.co.uk.

We can assist with the all of the following matters:-

• Divorce
• Judicial separation
• Financial remedy applications and orders
• Clean break orders
• Children matters
• Civil partnership dissolution
• Cohabitation agreements
• Separation agreements
• Pre and post-nuptial agreements
• Mediation