Getting divorced: couples split as lockdown tests relationships

The strain of the coronavirus lockdown is expected to result in a rise in divorces. Hannah Smith offers a financial checklist for anyone facing relationship breakdown.

Family lawyers are expecting a spike in business as the pressure cooker of life in lockdown puts a strain on relationships. Around 42% of marriages now end in divorce, but this number could rise as families fracture during the coronavirus crisis. 

How much does divorce cost?

On average, £15,089, and this eye-watering figure is the reason 61% of divorcees end up in debt every year, says insolvency practitioner Creditfix.

Around one in five people who are currently in debt name divorce as a leading cause of their financial problems. The cost of divorce can be even higher if you cannot reach an agreement and your case goes to court, especially if there are children involved.

“A divorce can materially impact upon all aspects of your life and continue to affect your plans for the foreseeable future,” says Emma Hammond, financial planner at Charles Stanley.

- Coronavirus: what does it mean for you and your divorce?

This is especially true if you cannot get a fair settlement – research from financial planning group Tilney found 41% of people it surveyed were worried their partner would take everything in a divorce.

Splitting assets

Making a list of assets and needs, as well as projected budgets for the future including extra costs for children or other dependants, can help in getting a financial agreement.

“When courts are establishing spousal maintenance, for example, inflation is often overlooked. It’s important to consider the ‘forgotten expenses’ such as the cost of moving, purchasing new homes, and protecting the assets that you will acquire or assets that you will retain,” says Hammond.

Remember pensions

A divorce can play havoc with your retirement plans, yet people often focus on the marital home and overlook the value in their pension pots. Tilney’s survey found 60% of people view the family home as the most important financial asset, while just 23% thought the same about pensions.

- Over half of married people have no plans for their pensions if they get divorced

“It’s concerning that three-quarters of us don’t see our pension as an important financial asset,” says Zoe Bailey, Tilney’s director of financial planning. “It can sometimes be worth more than the family home; for ‘silver splitters’ especially, leaving the pension to their former spouse risks being worryingly underprepared for retirement.”

When you divorce, you may get a pension sharing order (where a percentage of one partner’s pension is deducted and given to the other) or an offset agreement (where one partner takes less of the other’s pension pot in exchange for, say, a greater share of the equity in the house, or other savings).

When dividing up pension assets, you must be careful not to breach the annual or lifetime allowances to avoid extra tax bills, warns Hammond. “Orders relating to pension sharing must take place before a divorcing couple can apply for a Decree Nisi - a document that says the court does not see any reason why you cannot divorce,” she explains. You need this before you can get your Decree Absolute, which finalises the divorce.

- A conscious uncoupling should not compromise your pension

Knowledge is power

If there is an imbalance in a relationship and one party knows more than the other about the family finances, this can disadvantage one partner. Tilney’s survey found a quarter of people felt embarrassed because they didn’t know anything about their finances. It also found women were considerably more worried about their financial situation post-divorce than men, at 57% versus 38%.

This, says Tilney, is why it is crucial to gather as much information and paperwork relating to your family finances as you can, and take professional legal advice before you agree to anything.

Finances are stretched

Once your divorce is complete, focus on budgeting and planning, as money might now be stretched given that you are running a single-person household. “It is likely that your living costs increase substantially after the divorce as you move from having joint finances to running two separate dwellings, so you need to ensure you are budgeting and prioritising,” Hammond adds. But do not forget to enjoy your new-found freedom.