Divorce Financial Settlements: Dividing Money, Property and Pensions

A financial settlement looks at everything the two of you have, whether owned jointly or in one name:

• ✓The family home and any other property
• ✓Savings, investments and cash
• ✓Pensions, often the single biggest asset, and easy to overlook
• ✓Businesses and shares
• ✓Vehicles, valuables and other significant possessions
• ✓Debts, which are shared out too

Assets built up during the marriage are usually treated as shared. Assets owned before the marriage, or inherited, may sometimes be treated differently, but not always, especially if they were mixed into the family's finances or if they are needed to meet the other person's needs.

The starting point in England and Wales is an equal (50/50) division of the marital assets. The court then adjusts that to reflect each person's situation. By law (section 25 of the Matrimonial Causes Act 1973) it must consider factors including:

• ✓The welfare of any children under 18, this comes first
• ✓Each person's income, earning capacity and financial needs
• ✓The standard of living during the marriage and the length of the marriage
• ✓Each person's age and health
• ✓Contributions each made, including looking after the home and children
• ✓What each person will realistically need to house themselves going forward

If you reach an agreement (yourselves, through mediation, or via solicitors), you should put it into a consent order, a legal document that the court approves and seals. It costs £60 to apply for.

A consent order can also include a clean break, which ends all financial ties between you so neither can claim against the other in future. Where there are children, child maintenance is handled separately, see child maintenance.

Pensions are frequently worth as much as, or more than, the family home, yet they are the asset most often overlooked in a DIY settlement. There are three main ways to deal with them:

• ✓Pension sharing order, a percentage of one person's pension is transferred to the other, giving each their own pot, this is the cleanest option.
• ✓Pension offsetting, one person keeps more of another asset (such as the house) in exchange for the other keeping their pension.
• ✓Pension attachment (earmarking), a share of the pension is paid out when the pension holder retires, less common and less clean.

Valuing pensions properly often needs a specialist (an actuary), because the ‘cash equivalent’ figure on a statement can understate the real value of a final-salary pension. This is one of the strongest reasons to get advice before agreeing a split.

You can agree a settlement without solicitors, and if your finances are simple and you both trust each other, a solicitor can simply draft the consent order to make the agreement binding. But where there is a property, a business, meaningful pensions, or any sense that the other person is not being open, proper advice usually protects far more than it costs.

Scotland takes a different approach under the Family Law (Scotland) Act 1985: the focus is on fairly sharing the ‘matrimonial property’ built up between the date of marriage and the date of separation, which often means a cleaner, more predictable split than in England and Wales, and there is less emphasis on long-term spousal support.

Northern Ireland follows principles close to those in England and Wales, with financial orders made through the NI courts. In all parts of the UK, child maintenance is dealt with separately through the Child Maintenance Service.