No-Fault Divorce and Pension Sharing Orders – One Problem Solved, Another Exacerbated? – Wedlake Bell

Written by Matthew Brunsdon-Tully (Partner) and Jennifer Ball (Senior Partner) of independent London law firm Wedlake Bell

Until recently, divorce proceedings were governed by the Matrimonial Causes Act 1973. The Dissolution and Separation of Divorce Act 2020 came into force on April 6, 2022, paving the way for parties to divorce without one party having to blame the other.

This is something that has been widely welcomed by family lawyers and will hopefully help reduce animosity in what is already a very difficult time for separating couples.

Although dealt with separately, divorce proceedings and the resolution of marital finances are closely linked – the Court is unable to approve a financial order until a conditional order (formerly the Nisi decree) was not rendered in the divorce proceedings. When both parties are represented, there is often an agreement to delay finalizing the divorce pending financial agreement.

Indeed, once you are no longer a spouse, you lose certain rights, for example the right to a widow’s pension or a death benefit in service. Therefore, if one of the parties were to die during this period, it could have a significant impact on what the surviving spouse is entitled to.

The move to no-fault divorce and the introduction of the online divorce portal may well lead to an increase in the number of parties ‘going it alone’ and choosing to divorce without seeking advice. This carries a number of risks for separating couples, who may not understand the implications of a divorce until they fully understand their financial rights. For example, if they later remarry without including financial assistance in the divorce petition, they may find themselves unable to claim financial compensation against their ex-spouse (see s28(3) of MCA 1973).

Although the new divorce process will not change the way marital finances are handled, the potential decrease in the number of separating couples seeking legal advice may have a significant impact on the way that pensions are handled, or even if they are processed at all. Due to their complex nature, even before the introduction of no-fault divorce, pensions were often overlooked by the parties, especially young couples, where the retirement pension often seemed quite modest in the context of the larger marital pot.

In cases where there is a reasonably sized pension, family lawyers will usually obtain a specialist report on pensions, to understand both the capital value (which is relevant when set-off of pensions is being considered and not is generally not the same as a CE, particularly where the pension is a defined benefit plan or has annuity guarantees) and/or an income impact report (which is relevant where a pension or pension garnishment order is being considered).

Even with the benefit of these reports, the parties often do not appreciate the potential importance of pensions, focusing more on their immediate needs, for example, the provision of housing and their daily expenses. It is understandable under the circumstances, especially with the current cost of living crisis, but this short-term view could have an extremely detrimental impact on the party without a pension who will be able to support themselves in retirement.

Although there may be a move towards greater party autonomy in the divorce process, parties may request a Conditional Order (formerly Decree Nisi) after 20 weeks and the Final Order (formerly Decree Absolute) after 26 weeks. , there is now no obvious scope to contest a divorce and as such, after this 26 week period, a party could be ordered to divorce. There is a risk that in these circumstances the financially weaker party may find themselves at a disadvantage, as there may not be sufficient time to review and resolve the marital finances within this time frame, thus putting, for example, example, the splitting of pensions in real danger.

The Matrimonial Causes Act 1973 does, however, provide some protection to respondents in no-fault divorce cases. Section 10 has been amended as a result of the Dissolution and Separation of Divorce Act 2020 and Section 10(2) to (4) now provides special protection for defendants where a provisional order has been rendered and: –

(i) The provisional order is in favor of one party to the marriage; Where

(ii) The provisional order is in favor of both parties to the marriage, but one of the parties has since withdrawn from the application.

and the respondent asked the Court to consider under Article 10(3) their financial situation after the divorce.

Section 10(3) provides that the court hearing a defendant’s application under section 10(2) shall not make the divorce order final unless it is satisfied that (a) the plaintiff should not be required to make financial arrangements for the respondent or, (b) that the financial arrangements made by the plaintiff for the respondent are reasonable and fair or the best that can be made in the circumstances.

This section goes on to set out the factors the Court must consider when determining such a claim (including, but not limited to, age, earning capacity, financial resources) and circumstances. Respondent’s financial situation as it is likely to be after the Applicant’s death, if he were to die first.

The court has the power, however, to make the provisional order final in any event if circumstances exist which make it desirable to enter into the divorce without delay and the court has obtained a satisfactory undertaking from the plaintiff that it will make such provision. financial support for the defendant as the Court may approve.

As such, while this section offers some protection to defendants, the Court would have to consider on a case-by-case basis whether the potential loss of pension benefits would be considered serious enough (there may be others, such as the loss beneficiary trust status as a spouse) to prevent the provisional order from becoming final, the court will not exercise its

powers under this section if the financial provision can be dealt with under the usual application of financial remedies.

In short, divorced spouses would be well advised to take legal advice early, even if they would come back to it much later to save costs, to avoid falling into a costly financial trap.

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