The beginning of the upcoming year is typically a busy period for attorneys specializing in divorce. However, in 2024, this may not be the case due to recent studies revealing that over 270,000 couples have put their separation on hold due to the financial strain caused by the rising cost of living.
Researchers at Legal & General discovered that 19% of divorces were put on hold due to financial constraints. This trend has become more prominent since 2020, with individuals citing worries about income, the high cost of living, and the expenses associated with divorce as reasons for delaying the process.
According to Neil Russell, the leader of the family law department at Seddons, he often communicates with couples who are facing this problem. While financial struggles can certainly cause relationships to dissolve, they can also serve as a binding factor. With the rise in inflation and interest rates, families are under immense pressure as they cannot afford to sell their homes and purchase new ones, nor can they handle the costs of maintaining two separate households. As a result, many couples end up staying together.
According to Russell, during times of economic hardship, finances became a growing concern for individuals seeking to end their relationships. This was observed across all income levels and resulted in many middle-class couples facing unexpected challenges during their separation.
According to him, the state of the economy plays a significant role. In times of prosperity, obtaining a divorce is simpler due to the ability to purchase and sell homes faster, with a more stable economy. However, during difficult times, the process becomes more challenging.
The research revealed that almost half (48%) of individuals who have gone through a divorce experienced a decrease of approximately 31% in their income, resulting in an average annual loss of £9,700.
The day after New Year’s, commonly referred to as “divorce day,” sees a high number of inquiries due to the holiday season. In light of this, the Pensions and Lifetime Savings Association (PLSA) has published online guidance for private workplace pension providers on aiding couples who are separating. This coincides with the aforementioned day.
Although financial worries led to the postponement of approximately 272,000 divorces, only 20% of couples broached the topic of their retirement funds during the asset division process. Meanwhile, 58% took into account the worth of their shared residence.
Paula Llewellyn, the head of Legal & General’s retail division, stated that financial matters are crucial when couples go through a divorce, particularly in light of the current difficulties with the high cost of living. According to our findings, a divorce can have lasting consequences on an individual’s financial situation.
40% of divorced individuals feel that the divorce process results in an uneven distribution of finances, with one party gaining an advantage. Less than 33% opted for clean break orders, which safeguard against potential claims from their ex-partner in the future.
According to Llewellyn, numerous couples have failed to properly handle the necessary documents to guarantee a clear separation of their financial responsibilities towards each other.
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Seeking guidance from a financial advisor can improve the chances of a fair and equitable divorce. Although there has been an uptick in individuals seeking this type of assistance, it is important to promote this action among more couples.
The financial strain of divorce can have a significant impact on retirement funds, resulting in an average decrease of £63 per month contributed to pension accounts. According to research, approximately 29% of individuals who have gone through a divorce chose to give up their rights to the value of their pensions.
Joe Dabrowski, the PLSA’s deputy director of policy, stated that most separating couples understandably do not prioritize figuring out the division of pension assets.
“It is crucial to ensure that both individuals are financially supported during retirement, particularly in cases where one has been the main breadwinner and has accumulated a pension, while the other has taken on more familial caregiving duties and may not have the same level of financial stability.”
Source: theguardian.com
