Divorce trends and legal complexities in the UK

The Matrimonial and Family Proceedings Act 1984 replaced the minimum time interval between the date of marriage and being able to file a petition for divorce, from three years to one year.

According to the latest data from the Office for National Statistics, the average (median) duration of a marriage at the time of divorce in 2017 was 12.2 years for opposite-sex couples; a high last seen in 1972.

Marriages vs divorces of opposite-sex couples (England and Wales)

Source: Office for National Statistics

While divorce rates for opposite-sex couples in England and Wales are at their lowest level since 1973, which is around forty per cent lower than their peak in 1993, among older people rates are actually higher in 2017 than in 1993 – perhaps due to the fact we have an increasingly ageing population and people are getting married later in life.

Rate of divorce among opposite-sex couples (England and Wales)

Source: Office for National Statistics

It is possible to get a legal separation without an official divorce, where the couple can live apart without officially ending the marriage, or to annul the marriage during the first year of marriage.

While it may sound reasonably straightforward, navigating financial assets in a divorce comes with a whole host of complexities.

Legal complexity

Unreasonable behaviour and adultery are the only two grounds on which spouses can seek a divorce immediately, with the other grounds for divorce involve you being separated for two years or five years.

Any transfers between spouses made prior to the final annulment of the marriage are exempt from inheritance tax, but not following the split.

Also, it is important to note that a will does not become invalid on a divorce but some of its provisions are revoked, for example, legacies to the former spouse and could result in an intestacy. 

A will should, therefore, be redrafted following separation to reflect the changes in circumstances.

Where any trusts have been set up it is also worth reviewing these to consider whether any changes are needed; for example, in respect of trustees and beneficiaries.

The legislation governing pension rights on divorce is exceedingly complex.Ian Neale, Aries Insight

Clients should always go through a solicitor to make the agreement legally binding and can agree on child maintenance at the same time or separately.

In a divorce, none of the options for pension rights – lump sum payment, offsetting, earmarking or sharing – are mandatory, according to Ian Neale, director of Aries Insight.

Rather, it is up to the parties and their lawyers, and if necessary the court, to decide on the best method.  

Mr Neale explains: “A combination of methods can be used, if appropriate, but the rights from a given pension arrangement that are, or have been, subject to a pension sharing order in respect of a marriage cannot then be subject to an earmarking order in respect of the same marriage.”

Similarly, a pension sharing order may not be made against a member’s benefits under a pension arrangement if there is already an earmarking order in force against the member’s benefits in that arrangement.

He continues: “The legislation governing pension rights on divorce is exceedingly complex. 

It requires the parties involved – including the court and pension scheme trustees or managers, besides the couple and their advisers – to prepare and pass on detailed communications within a prescribed and often demanding timeframe.”

For this reason, he suggests scope for errors and omissions is huge.

Furthermore, he notes that pension sharing and earmarking legislation does not cover Pension Protection Fund compensation and Financial Assistance Scheme payments.  

He adds: “Separate legislation to introduce earmarking and sharing of Pension Protection Fund compensation was included in the 2008 Pensions Act, effective from April 2011.”

What about HNW clients?

England is frequently seen as a very generous jurisdiction for high-net-worth individuals, according to Phoebe Turner, managing director of Stowe Family Law.

She explains that while it is preferential to initiate the original divorce proceedings in England, if the other party issues proceedings abroad first, then the other party can, in certain circumstances, bring Part III proceedings to help them get the most out of their divorce settlements.

She explains: “The purpose of Part III proceedings is to alleviate adverse consequences to one party where they have been given no, or insufficient financial provision by a foreign court if one of those parties has a sufficiently strong connection to England.”

Under English law, the starting point is a 50/50 division of all the parties’ assets unless one party can explain to the court why there should be an unequal division.Phoebe Turner, Stowe Family Law

For example, the ex-wife of a Russian oligarch is set to bring Britain's biggest divorce case to the High Court over her former husband's alleged £15bn fortune. 

Ms Turner says: “Technically this is not a divorce case; Natalia Potanina and Vladimir Potanina are already divorced.

“However, Mrs Potanina is entitled to apply for a financial order in England under Part III of the Matrimonial and Family Proceedings Act 1984 – this means the court can make an order for her to get further funds from her husband even after an overseas divorce (in this case in Russia).”

Mrs Potanina has been living in England since 2016, which Ms Turner says is likely to have been “a tactical move on the advice of her lawyers”.

Already divorced in Russia, it is understood that Mrs Potanina wants the case to be in London because her former husband has close ties to Putin and is therefore unconvinced that she would receive a fair outcome in Russia.

So why is the UK such an attractive option for HNWIs seeking payouts from former spouses? 

Under Part III proceedings, Mrs Potanina’s pay-out may be similar to that of the original divorce and financial remedy proceedings had taken place in England.

Ms Turner says: “Under English law, the starting point is a 50/50 division of all the parties’ assets unless one party can explain to the court why there should be an unequal division.”

She continues: “For example, if one party has the care of young children; if it is a short marriage; if there is a pre/postnup; if there are significant assets which were acquired before the marriage.

“There may be a distinction between matrimonial and non-matrimonial assets; pre-acquired assets or inherited assets may be ring-fenced.”

She continues: “However, even if the assets are ring-fenced they may be invaded if there are insufficient marital assets to meet a party’s needs.”

In terms of what Mrs Potanina can receive, will depend on all the circumstances of the case.

Ms Turner says: “Under the Part III proceedings, the court will look at any financial benefit which Mrs Potanina has already received in Russia, and the court will not allow her to receive an award higher than she may have received had the proceedings initially been initiated in England.

“The award should ensure Mrs Potanina has enough to meet her reasonable needs.

"Reasonable needs for a billionaire will be far higher than those of your average English family so any pay-out is likely to be hugely significant.”

She adds: “As not all proceedings take place in open courts, the biggest divorce settlement in England is unknown.

“Some of the wealthiest users of the English court system successfully manage to keep their affairs private and out of the public domain.”

Pre and postnups frequently feature in such cases but are also growing in popularity among young couples.

However, Ms Turner adds that prenups are not automatically enforceable in England and frequently the drafting of the documents – with no disclosure, and wives put under severe pressure to sign them with no legal advice – renders them inadmissible and worthless.

victoria.ticha@ft.com