The author of this article notes recent legal changes affecting divorce applications and argues that this does not mean that those affected should overlook pension assets.

This publication frequently writes about the often melancholy topic of divorce and there's no surprise: the large number of marriages which end in divorce and tussles over wealth can involve considerable sums. The most careful trust and estate planning processes can be unravelled by divorce. In the UK, where pre-nups are not fully recognised in English and Welsh courts, there are specific issues to confront.

In this article, Linda Lamb, a solicitor and director of LSL Family Law, writes about pension assets, a topic sure to be prominent given it can be one of the most important assets that a couple might have. The editors here are pleased to share these views with readers and invite responses. Email the editor at tom.burroughes@wealthbriefing.com and jackie.bennion@clearviewpublishing.com

The introduction of online divorce applications has made it procedurally simpler for either spouse to apply without legal representation. The online process for divorce has considerably reduced the number of divorce petitions returned due to mistakes in the application. The online process ensures that each stage is completed correctly before the application can move onto the next section. However, presently the online process is not open to family lawyers to apply on behalf of their clients.

Currently there is a section which asks if the applicant (known as the petitioner) wants to apply for a financial order. This does provide information on pensions but there is not a great deal of detail about the consequences or what orders can be obtained. It has been identified that many applicants, women in particular, are not aware of the importance of their spouse’s pension - in that it’s often valuable and can be split to provide them with their own pension fund.

Previously, on divorce the wife could claim as hers the same national insurance contributions and so obtain a full state pension on the basis of the husband’s contributions. With the new state pension provision ending this entitlement, woman have been left more vulnerable if they have not worked for a number of years.

There are a number of reasons why people are not seeking advice:

1. No legal aid – when this was available for matrimonial finance advice it was the lower income spouse who would be eligible. Now that legal aid is not available this vulnerable group is not seeking advice and so is totally unaware of how important it is to consider pensions on divorce.

2. Fewer people seeking advice – The pressure on the family finances means that many are not seeking legal advice on separation. In addition, some believe that they can obtain everything online which, without proper explanation, means that important aspects such as pensions are overlooked or misunderstood.

3. Stronger partners can persuade the more financially vulnerable not to seek legal advice, often with a motivation to protect a valuable pension, particularly those with a government final salary if the pension is overlooked.  
        
Everyone who is separating from a spouse should get legal advice from a family lawyer accredited with Resolution (formerly the Solicitors Family Law Association) and to use this as a point of reference when trying to settle the financial aspect of the marriage with their spouse. Unfortunately, sometimes the solicitor does not advise properly on the steps that should be taken over the pension and that is where a financial advisor's support can be crucial.

Pensions can be overlooked in an order for a number of reasons:

a.    Non-disclosure - the other spouse did not disclose all the pensions that they have and so there was either no pension order or the pension order did not deal with all pensions. This would provide an opportunity to vary the order because the other partner has been dishonest; and

b.    Wrong legal advice - the solicitor did not advise that there was a pension report with the result that the pension was undervalued; perhaps not providing the same level of income on retirement or not providing for any pension and the right to claim was dismissed, and so cannot apply to change the order. This could result in a claim against the solicitor for negligent advice.

However for your wealth management clients who may not be aware of these laws concerning pensions, or if there has been an error there are a number of options for them below:

1.    Attend mediation – See if your client can agree with their spouse what is going to happen to the finances, including the pension. The mediator will suggest a pension report to advise on how and which pensions should be split; and

2.    Advise your client to apply to court for a pension sharing order – the court will then assess what pensions there are and may order a pension report to advise the court on the division of the pensions of both spouses and could also deal with the other financial aspects.