DIY divorces have soared and pension splitting deals have fallen in the wake of last year’s legal reforms, new figures reveal.
New ‘no fault’ divorce legislation introduced last spring has made splitting up simpler and speedier, but critics say many ex-spouses could be left worse off due to these trends.
There were nearly 70,000 online DIY divorce applications during the the first nine months of last year, compared with around 61,500 in the whole of 2021, according to recent official data obtained by law firm Nockolds.
Legal reforms: Couples can now get divorced within six months of first applying even if one partner is opposed, and the process is largely online
Some 22 per cent of divorce applications included a pension sharing order – the most common way of splitting retirement pots – in the first nine months of last year.
That was the same proportion as in the whole of 2021, although the percentage has dropped from 33 per cent in 2017 – see the chart below for the longer-term trend.
And Nockolds says it is likely many couples undertaking DIY divorces are overlooking pensions, potentially their largest financial asset besides the family home.
Legal and finance experts warned in advance of the reforms that quicker ‘no fault’ divorces could make it more challenging to split financial assets like pensions fairly.
Couples can now get divorced within six months of first applying even if one partner is opposed, and the process is largely online – including the serving of divorce papers by email.
Ignoring pension assets can be financially disastrous for someone with little or no retirement provision. If a spouse has built up even a modest final salary pension, there is a good chance that it will be worth more than the average UK house
Francesca Davey, lawyer at Nockolds
Financial settlements are still dealt with in a separate and parallel process which can continue after the divorce is final.
But a report by Pensions Minister Steve Webb and family law barrister Rhys Taylor predicted the new emphasis on haste meant divorcing spouses may under-estimate the value of pensions, or prioritise issues like childcare, property and more immediate financial security.
Divorced couples who don’t have a financial settlement can still go back and negotiate one later, but once there is it is nearly always final unless there are exceptional circumstances.
It is not clear yet how many DIY online divorces are being done including a financial settlement – with or without a pension split – as those figures won’t be published until the spring, says Nockolds.
Therefore, it is possible the rise in quick DIY divorces will eventually lead to more couples belatedly realising they still need to sort out their finances.
There are three main options when dealing with pensions in a divorce – sharing them on a clean break basis in a pension sharing order; one partner earmarking some of the income to be paid to an ex-spouse after retirement; and offsetting their value against other assets.
With the exception of 2019, the annual number has been on a downward trend – although we don’t have the full data for 2022 yet
Francesca Davey, principal associate in the family law team at Nockolds, says: ‘It is easy to overlook financial remedies or apply for remedies which are inappropriate when making DIY divorce applications.
‘Because a pension is usually in one spouse’s name and is associated with their employment, there is often an incorrect assumption that it isn’t sharable.
‘Ignoring pension assets can be financially disastrous for someone with little or no retirement provision. If a spouse has built up even a modest final salary pension, there is a good chance that it will be worth considerably more than the average UK house.
Splitting pensions fairly in a divorce
A free jargon-busting guide launched by a legal charity helps couples divide one of their most valuable assets. Find out more here.
‘While most people will have a good idea what their house is worth, far fewer know what their spouses’ pension is worth, what its benefits are worth, or even how many pensions they have or who their fund is with, which leads to a skew in priorities in dividing matrimonial assets.’
Nockolds reckons that, for many couples, a pension sharing order is the fairest way of dividing these assets, because they are split at the point of divorce and enable the recipient partner to pay a lump sum into their own pot or start paying into a new one.
However, it warns that many spouses undertaking DIY divorces make the mistake of opting for the usually inferior ‘earmarking’ option, called a pension attachment order.
‘A pension attachment order is risky unless the pension is already in drawdown, and it is important to look at exactly what benefits the pension type offers to avoid losing out by choosing the wrong option,’ says Davey.
She adds that the introduction of no-fault divorces on 6 April last year is already accelerating the trend for DIY divorces in which pension assets are overlooked.
‘We are already seeing evidence that no-fault divorce is turbo-charging hasty DIY divorces in which the applicant does not consider all the financial remedies available to them.’
Nockolds points out that the fall in applications for pension sharing orders comes despite both the total number of divorces and the average age of divorcees increasing.
Do you have a question about divorce?
Legal experts can answer you on our pages. Questions are published anonymously. Write to us at: firstname.lastname@example.org.
Please note we will not be able to answer everyone’s question.
If you need a lawyer, the Law Society has a tool which allows you to find solicitors in your area who specialise in family and divorce issues.
If you are experiencing abuse, phone the police. You can also contact the National Domestic Violence Helpline for support on 0808 2000 247.
Steve Webb, a former Pensions Minister and now a partner at financial consultant LCP, says: ‘There was always a risk that a more streamlined divorce process could lead to a greater emphasis on swift resolution and less focus on more complex and difficult subjects like taking account of pensions when reaching a divorce settlement. ‘
He adds regarding the Ministry of Justice data obtained by Nockolds: ‘These figures suggest that those concerns were well founded.
‘There is a real risk that if people divorce without taking legal or financial advice, they either neglect pensions altogether or fail to see the true value of the pension wealth which each party has built up.
‘The danger is that we will face rising levels of retirement poverty amongst divorced women if this problem is not addressed.’
A Ministry of Justice spokesperson said: ‘Our changes to divorce law have given couples more time to resolve their issues and a greater chance of doing so amicably.
‘Our new online divorce system provides information about financial matters including pensions to support families through financial proceedings, which are separate.’
The Government expected a temporary spike in divorce applications following divorce reforms last April because people will have waited to apply under the new process. It anticipates the number will return to previous levels following an initial peak.
> What to consider if you are getting divorced: Find a five point financial plan here