In April 2022 ‘no fault’ divorces were introduced. This means that married couples no longer had to provide a fault-based reason to separate, something that was designed to speed up the divorce process and to reduce legal costs.
Yet these fast-track divorces could, in the long-term, cost one of the spouses dearly and jeopardise their future financial security. The reason for this is that couples who use ‘no fault’ divorces are more likely to split the assets between themselves, which may mean one of the ex-spouses is inadvertently disadvantaged.
An asset that is particularly at risk of being split unfairly are the household’s pension plans, which could disadvantage one of the ex-spouses’ later on in life. This might be, for example, if one spouse stopped working to bring the children up, which means they would no longer be contributing to their own workplace scheme.
As a result, they may have to rely on the other spouse’s workplace pension in retirement to make ends meet. However, if this pension is not shared equitably during the divorce, it could have dire financial consequences for them.
This is why splitting the household’s pensions fairly is so important, and something a financial adviser can help to ensure. Read on to find out more.
1. Ensure you get the right pension settlement
While the family home is normally seen as the most valuable marital asset, in many cases the pensions being held by one of the spouses is likely to be equally as valuable – if not more so. In addition to this, as pensions are seen as a ‘joint marital asset’ there is a legal obligation to split the household’s pension pots equally, no matter which spouse holds them.
Yet research has revealed that more than two thirds of divorcees (67%) do not discuss pensions when divorcing. One reason for this, however, could be that calculating the value of a pension, and how best to split it, can be complicated.
During the divorce, a financial adviser can help you understand the total value of your household’s pensions and how much income they could provide. Once this has been done, they can then explain how the pensions could be split.
Broadly speaking there are three options you could consider, which are:
- a deferred lump sum: this is where both parties enter an agreement to share the pension at a later date
- a pension sharing order: with this, a court decides how much of the pension each ex-spouse receives. As any amount received from the pension is then seen as the recipient’s money, they have the right to re-invest it into any pension they like
- a pension attachment order: formerly known as pension earmarking, this redirects all (or some) of a pension to an ex-spouse, although nothing will be paid to the ex-spouse until the pension holder accesses it.
2. Create a financial roadmap to get you back on track
If the household finances were dealt with by your ex-spouse, the prospect of having to look after your money may feel daunting. Working with a financial adviser can help you get a better understanding of your options and how to get the most from your wealth.
This in turn could help you look forward to a brighter financial future. Another way they could help you get back on your feet financially is to create a roadmap that identifies your short, medium, or long-term aspirations.
Doing this could help you to pinpoint your post-divorce goals and help you achieve them more quickly, while at the same time, ensure you remain on track to meet your aspirations.
3. Help you to ‘inflation-proof’ your settlement
While a lump sum settlement could help to get you back on your feet financially, it’s long-term value could drop significantly in real terms because of inflation. This is the rising cost of goods and services over time, which means the spending power of your settlement could fall as £100 will buy you less in the future than it does today.
To demonstrate this, you might want to consider the following. According to the Bank of England’s inflation calculator, you’ll need £177.20 in May 2025 to have the same spending power as £100 in 2005.
In other words, your money had to grow by more than 75% to keep pace with the rising cost of goods and services during the 20-year period. If it didn’t, your money dropped in value in real terms.
One way you might be able to ‘inflation-proof’ your settlement is to consider investing it, as historically the stock market has tended to outperform cash savings.
This is highlighted by the following graph, which shows the performance of a medium risk 60:40 multi-asset investment portfolio between 1 January 2005 and 31 January 2025.
Data sourced from Morningstar by AFH Wealth Management. The 60:40 portfolio allocates 60% to MSCI All Country World Index (ACWI) and 40% to Bloomberg Global Aggregate.
As you can see, the investment portfolio provided significant returns over the long-term, despite downturns along the way. That said, always remember that past performance is no guarantee of future performance and you may receive back less than your original investment.
Get in touch
If you are getting a divorce, or considering applying for one, we can help you understand the financial implications of doing so, and how to ensure you get a fair settlement. If you would like to discuss this further, please call us on 0333 010 0008 as we’d be happy to arrange a no obligation initial meeting with one of our independent financial advisers.
Published: 18 July 2025