Our family law solicitors have over 30 years of experience helping clients reach fair outcomes on property, pensions, savings, and ongoing financial support. To speak to a member of our team, call us on 0161 665 3502 or fill in our contact form.
What is a divorce financial settlement?
A divorce financial settlement is a formal agreement that sets out how you and your spouse will divide your finances when you separate. It covers assets including the family home, savings, investments, pensions, and any business interests, as well as ongoing financial obligations such as spousal maintenance.
A financial settlement is separate from the divorce itself. You can be divorced without having resolved your finances, but this carries risk. Financial claims between former spouses do not automatically expire when a divorce is finalised, and either party could make a claim years later. For this reason, it is strongly advisable to get a financial order in place at the same time as, or shortly after, your divorce.
How is a financial settlement reached?
Most couples reach a financial settlement through negotiation, either directly or with the help of solicitors. If you can agree on terms, your solicitors will draft a consent order, which is then submitted to the court for approval by a judge. The court fee for a consent order is £53. Once approved, the order is legally binding on both parties.
If you cannot agree, you will generally be required to attend a Mediation Information and Assessment Meeting (MIAM) before applying to the court. This is a legal requirement in most cases. A mediator will explore whether a negotiated settlement is achievable before court proceedings begin.
If mediation is unsuccessful or unsuitable, for example in cases involving domestic abuse, either party can apply to the court for a financial remedy order.
What is a clean break order?
A clean break order severs all financial ties between former spouses permanently. Once granted, neither party can make future financial claims against the other. This type of order is particularly important if either of you comes into money later (an inheritance, for example) as without a clean break in place, your former spouse could still make a claim.
A clean break order can be agreed upon by consent or ordered by the court. The court fee for a contested financial remedy order is £275. Your solicitor's fees are in addition to this.
How is a financial settlement calculated?
The court's starting point is an equal division of matrimonial assets, but it will adjust this based on the specific circumstances of each case. The factors a judge will consider include:
- The income, earning capacity, and financial resources of each party
- The financial needs and obligations of each party, including towards dependent children
- The standard of living enjoyed during the marriage
- The age of each party and the length of the marriage
- Any physical or mental disability
- Contributions made by each party to the welfare of the family, including non-financial contributions
- The value of any benefit, such as a pension, which either party will lose as a result of the divorce
The court has broad discretion. There is no fixed formula, which is why legal advice is important. Outcomes can vary significantly depending on how a case is presented.
The three areas that most commonly require careful consideration are property, pensions, and spousal maintenance.
Property
The family home is usually the most significant asset in a divorce settlement. Options include one party buying out the other's share, an immediate sale with proceeds divided, or a deferred sale (sometimes called a Mesher order) where the property is sold at a future point, often when children reach adulthood.
Property owned by one spouse before the marriage is not automatically excluded. If it has been used as the family home or its value has increased during the marriage, it may still be taken into account. The length of the marriage is often a key factor here.
Pensions
Pensions are frequently the largest financial asset after the family home, and they are often overlooked in settlements. There are three main ways pensions are dealt with on divorce:
- Pension sharing - a portion of one spouse's pension is transferred into a pension in the other's name. This is a clean break approach and is the most common option.
- Pension offsetting - the pension is offset against other assets. For example, one party keeps their pension in full while the other receives a larger share of the property.
- Pension attachment (earmarking) - payments from the pension are redirected to the former spouse when they are drawn. This is less commonly used as it does not create a clean break.
Getting an accurate valuation of pensions including defined benefit (final salary) schemes, is essential before any settlement is agreed. We regularly advise on cases where pensions are substantial or complex.
Spousal maintenance
In some cases, one spouse may be required to make regular payments to the other after divorce. This is known as spousal maintenance. It is more common where there is a significant disparity in income, or where one party has given up a career to raise children and their earning capacity has been affected.
Spousal maintenance can be time-limited (to allow the receiving party to become financially independent) or, in longer marriages, paid indefinitely. A clean break settlement avoids ongoing maintenance obligations altogether where circumstances allow.
What are the benefits of having a financial agreement in place?
Having a financial agreement in place can offer several benefits, including:
- Peace of mind – by knowing how your finances will be divided, you can avoid any costly disputes down the line.
- Clarity – having a financial agreement will give both parties certainty about their financial situation following divorce.
- Security – if you have dependent children, having a financial agreement in place can provide financial stability for them in the event of a divorce.
What divorce settlement am I entitled to?
There is no fixed entitlement since divorce settlements in England and Wales are based on what the court considers fair in the particular circumstances. You are not automatically entitled to half of your spouse's assets, nor are they automatically entitled to half of yours.
What you receive will depend on factors including the length of the marriage, each party's financial position, contributions made during the marriage, and the needs of any children. Taking early legal advice gives you a realistic picture of what a fair outcome looks like in your case, and puts you in a stronger position to negotiate.
How can I make sure I get a fair financial agreement?
It is important to seek legal advice from an experienced family law solicitor if you are considering divorce. They will advise you on your financial settlement options and help ensure you receive a fair deal.
Who pays for a divorce settlement in England and Wales?
In England and Wales, the party who applies for the divorce pays the court fees. This currently stands at £53 (for an order by consent). If you cannot afford the court fees, you can apply for legal aid subject to eligibility, and if your income is low or you are on passported benefits, you may be exempt or pay a lower amount.
How can I make sure I get a fair financial agreement?
It is important to seek legal advice from an experienced family law solicitor if you are considering divorce. They will advise you on your financial settlement options and help ensure you receive a fair deal.
