On 6 April 2022 the Divorce, Dissolution and Separation Act 2020 came into force for divorce proceedings applicable for all marriages and civil partnerships.
According to The Law Society, the new legislation will:
- Replace the ‘five facts’ with a new requirement to provide a statement of irretrievable breakdown;
- Remove the possibility of contesting the divorce; Introduce an option for a joint application; and
- Make sure language is in plain English — for example, change ‘decree nisi’ to ‘conditional order’, and change ‘decree absolute’ to ‘final order’.
According to the latest Office for National Statistics figures, in 2020 there were 103,592 divorces granted in England and Wales. The UK government has introduced a new online service to accommodate the divorce act changes.
Advisers may be able to speed up the pension companies’ administration
As all financial planners should know, pension sharing orders are used to split pensions in the event of divorce. Most financial orders in divorce are dealt with by consent, but the Family Court Statistics for 2019, which are the latest, show that less than 12% of divorces provided for any pension order.
Pensions are, however, becoming increasingly contested in UK divorces.
Arbitration service
Many financial advisers act as an arbitration service, helping divorcing clients by saving them from going to court. The fee for filing a divorce petition in England and Wales is currently £550, with a family lawyer’s fees on top. It is therefore vital advisers understand the new divorce rules to be able to correctly advise separating clients.
Now is the time for more financial advisers to advise divorcing clients and use the new online divorce procedure, instead of the courts
Family lawyers for years have complained about the complexity of pension sharing or offset: the slow response by pension companies, first providing information and then applying the implementation of the orders.
Many advisers have a long and responsive relationship with pension companies and may be able to speed up the company’s administration for the benefit of their clients. Family lawyers find it difficult to get the information they need quickly and if there are errors they may not know.
Crucial role of gender
If you are to help separating clients, it is important to understand the UK’s overall gender-specific pension statistics. There is a 41% gap between male and female pension provision — one of the worst gaps in Europe. Women’s pension wealth is approximately a quarter of men’s.
Family lawyers find it difficult to get the information they need quickly
The fintechs are trying to educate about the importance of long-term financial planning but, if you count the gender split of investment platform app users, women make up only 24%.
Today I used Google to search for ‘women’s pensions’, expecting to see the likes of the global fund managers and pension companies listed high. I was disappointed. The Financial Ombudsman Service’s complaint procedure and Waspi (Women Against State Pension Inequality) came in the top-four rankings. This would put off anybody looking to start a pension and particularly working women, who list ‘lack of confidence’ as the main reason not to invest.
If you are to help separating clients, it is important to understand the UK’s overall gender-specific pension statistics
We must acknowledge search engines lead the way when people want to find out something. Google’s current TV advertising uses the strapline, ‘The more we learn, the closer we get,’ which is what the financial services industry should adapt as its mantra.
Pension companies and fund managers also need to ensure the search engine optimisation includes the correct words used in a search for pension investing. Women really do need to invest more in pensions.
There is lots of technical information about pensions and divorce from the larger pension companies, written for financial advisers, not divorcees. As one in two marriages ends in divorce, now is the time for more financial advisers to advise divorcing clients and use the new online divorce procedure, instead of the courts.
It is vital advisers understand the new divorce rules to be able to correctly advise separating clients
For those who have advised divorcing clients for years, it is a little easier now with no-fault divorces available. Having advised on divorce and bereavement many times, I recommend taking a box of tissues and having separate meetings, and of course up-to-date technical knowledge.
Financial advisers should be advising married clients on pensions and divorce, with more technical advisers helping family lawyers with pension sharing.
Kim North is managing director at Technology & Technical
This article featured in the May 2022 edition of MM.
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I used to do a lot of work on divorce and for many years worked closely with a forensic accountant.
We never split pensions – that just made the potential for 2 poor pensioners. It is also a messy solution as much admin is needed and dealing with pension providers is hardly an optimal experience. I guess we worked in a rarefied area where there were other assets that could be offset after taking pensions and other assets into consideration. A far simpler and cleaner way of dealing with the situation. After all, in many cases trading down the house is a viable option.