In many circumstances, the financial settlement in a UK divorce is the most contentious and contentious aspect of the divorce. Protracted fights and disputes in court may become exceedingly contentious, not to mention astronomically costly.

Many inquiries arise: What am I entitled to in a divorce settlement? What are the terms of a divorce settlement? Would the divorce settlement compensate me for the fact that I was not at fault? Solent Family Mediation Portsmouth here to help.

This article explains what you must consider when dividing your assets and determining if you or your ex-spouse will need financial help from the other after the divorce. It will also describe how mediation may help you keep expenses to a minimum and keep conversations focused and productive, as well as alternatives to mediation if you cannot reach an agreement.

First, we will examine what the courts would consider if they had to make the judgement, and then we will discuss how you might achieve a settlement without going to court.

Equal distribution of assets

While determining a divorce settlement in the United Kingdom, the court seeks to establish an equitable split of marital assets. Adjustments must be made to accommodate for the couple’s specific circumstances and demands, beginning with a 50/50 share.

There is no standard divorce settlement in the United Kingdom. There is no simple method to determine how much each person receives. This is very difficult since no two families have identical conditions.

Contrary to common assumption, it seldom matters who was “to blame” for the divorce. When one spouse has committed adultery or acted unreasonable, the other spouse is not entitled to a greater share of the assets. In fact, the introduction of no-fault divorce laws in England and Wales in April 2022 means that no explanations or accusations are required when filing for a divorce.

When determining how far from a 50/50 split to deviate, the courts take into account a great deal more objective factor.

The requirements of children

If the couple has children, their requirements take precedence. The living circumstances of the children must take precedence. If they will primarily reside with one of their parents, every effort will be taken to ensure that they have a suitable living area. The parent caring for the children may continue to reside in the marital residence. Conversely, if this is not possible and the marital home must be sold, the parent who will be caring for the children may require more than half of the proceeds to purchase a smaller home that is still large enough to meet their needs. For instance, if the children are a boy and a girl, they will often want a 3-bedroom home, even if this consumes the whole sale price of the current home.

Needs of the divorced pair

The courts assess the income of each party, the level of living the family had prior to the dissolution of the marriage, and the earning ability of each party.

The premise behind earning capacity – the amount a person should be able to earn given their abilities and experience – is that everyone should maximise their income generating potential and be financially independent.

Before they had children, Adam and Brenda had comparable occupations, careers, and earnings. Brenda then decreased her hours so that she could care for her children. Adam’s pay is now £45,000 per year, whilst Brenda’s salary for part-time work is £18,000 per year. The children will continue to live with Brenda, and she will progressively increase her hours as they become older, with the goal of returning to full-time work at the age of 16 and earning an estimated £37,000. The court is likely to determine that Adam’s income is sufficient for a single person and order him to pay Brenda maintenance in addition to child support until she is able to return to full-time employment.

Other assets acquired by the couple during the marriage must also be shared. Pre-marriage or pre-marriage assets are not considered marital assets and are not subject to division. These may include bank and savings accounts, life insurance policies and investments, automobiles, household furniture, and, if one or both parties are self-employed, the worth of their companies accumulated throughout the marriage.

So, it is frequently difficult for the court to appropriately appraise the couple’s marital assets and determine a fair and reasonable method to split them. Again, the starting point will often be 50/50, and the court will then assess the couple’s specific circumstances and any arguments made by one party for receiving more. This has often resulted in protracted (and costly) legal disputes, both during talks before court hearings and during the proceedings themselves.

Divorce Pension Settlement

Private or work-related pensions are often one of a couple’s largest assets, second only to the value of their home. These pensions may be quite difficult to calculate – and are often more than people anticipate – so it is probable that specialised financial guidance will be necessary.

After calculating the value of the pension plans, it is a highly delicate balancing act to determine a fair distribution. Even if a pension is valued based on a Cash Equivalent Transfer Value, it cannot be converted into cash instantly. It must be invested in order to generate a retirement income.

What is the most equitable method to divide the pensions? The easiest option is when both couples have comparable Cash Equivalent Values in their respective plans; in this case, a split would likely not be necessary. But, it becomes more problematic when there is a large disparity between the Cash Equivalent Values of the spouses, and if one spouse was unable to completely pay to their own pension throughout the marriage because they were caring for their children. In this situation, the courts would often deem it reasonable to provide a larger share to the spouse who lost out on accumulating a pension due of child care obligations.

The second question is how the split should be executed. Typically, this occurs through a Pension Sharing Order, in which the pension firm transfers the value into a new plan in the individual’s name – or into their current pension fund. Rarer alternatives include “offsetting” against the value of other assets, with the party with less pension provision receiving more cash assets, and a Pension Attachment Order, in which the pension company pays a specified percentage of the monthly income payments to each party when the pension becomes due to be paid in the future. In the majority of cases, none of the final two alternatives is a fair approach to deal with the assets.

It is vital to clarify that the state retirement pension is not included in the pensions to be divided.

Who makes all these decisions?

We have examined the factors commonly considered by British courts when determining a divorce settlement’s financial terms. Nonetheless, the courts expect you to have exhausted all efforts to reach a decision and agreement on your own. Court should always be the very last option.

Ideally, the divorced couple would reach an agreement on the financial settlement. Yet, this is an extremely challenging talk to have due to the distress and emotions associated with a divorce.

Mediation is the fastest and most clear approach to reach an agreement without having the court decide and maybe issue an order that neither of you feels is fair. First and foremost, the mediator is unbiased and neutral. They are there to assist you discuss the preparations you need to make in a much more calm and objective manner than you would be able to otherwise. Generally, you would be able to reach an agreement in two or three meetings, however this may vary depending on the complexity of your financial circumstances.

Individuals with low incomes or certain benefits may be eligible for Legal Aid, which would pay for all of that individual’s MIAM and mediation sessions, as well as their spouse’s MIAM and the first hour of mediation.

After an agreement has been reached via mediation, it is often preferable for the court to issue a Consent Order confirming the settlement. A common topic surrounding divorce is whether or not a divorce settlement may be reopened or reversed in the future. A Consent Order costs only £53 and prohibits this from occurring (unless in exceptional instances, such as if one party was dishonest about not declaring all assets at the time). A second option would be solicitor discussions. Each side hires their own attorney, who works to maximise the settlement in their client’s favour. Each side may incur several thousand pounds in legal fees to conduct these discussions, and the process is sometimes lengthy and controversial.