Pensions  

How to help older couples who are splitting up

  • Describe some of the challenges of getting divorced in retirement
  • Identify the role of a financial adviser in the process
  • Describe the challenges with defined benefit pensions
CPD
Approx.30min

This document provides the court with a detailed summary of their financial position, both capital and income, and also requires clients to set out their annual expenditure needs. This can be very difficult for clients that have had little to do with the family finances over the course of a long marriage.

 Advisers can be of huge assistance in helping clients to complete this document. It can save on legal costs, and delays moving forward, if this groundwork is done in advance by those with an in-depth knowledge of the party’s finances. It can also be enormously helpful to assist them with accurately setting out their income needs going forwards.

 Once the value of the assets is established, the court will determine how they should be divided. Judges are given a great deal of discretion, but they must apply the following principles: 

 Meeting a spouse’s financial needs

Meeting financial needs is always the judge’s priority. But ‘need’ is considered in light of factors such as the standard of living enjoyed during the marriage and the length of that marriage. It is therefore possible for a spouse to be awarded many millions to meet their ‘needs’. Inherited or dynastic assets can also be transferred from one party to the other, or sold, to meet needs.

 Older couples’ needs will differ from younger couples. Whereas when younger couples divorce, needs often relate to caring responsibilities of minor children, social care becomes more vital for more elderly clients. 

One is looking at a stage of life when there is an expectation that assets are probably going to be declining rather than increasing, and yet one needs to provide for two homes when assets and income are fixed. In addition, funds may have been provided to children to help buy them a property or as part of inheritance tax planning.  

 A party’s needs will also be affected by either physical or mental ill health, and may also impact life expectancy. 

Sharing the assets

If there are more resources than are ‘needed’ by the parties, then the court will consider whether the matrimonial assets should simply be shared between them.

Matrimonial assets are those that have been earned or accrued during the marriage. This reflects the court’s approach to marriage as a partnership, and that fairness requires the fruits of that partnership to be shared at the end of that marriage, regardless of who was the breadwinner.

However, inherited assets or assets acquired before the marriage are generally considered as non-matrimonial and are unlikely to be shared unless required to meet needs.