Reform of financial provision on divorce

20 April, 2023Gerry Brown

Every year sees thousands of divorces and endings of civil partnerships. These can often result in significant financial issues for the separating parties and problems can be exacerbated when there are children involved. Not only has the ongoing ownership of assets to be determined, or split, but maintenance might have to be paid. Assets such as pensions will also need to be considered.

Although the legal work resulting from the separation will be carried out by solicitors, financial planners and paraplanners will have very significant input into the process. 

How are divorce cases settled?

Most financial settlements will be agreed after negotiation by the separating parties (or their representatives) but some, where agreement cannot be achieved, will be referred to the High Court. The Court will, after due consideration, issue a financial remedy order – an order for financial provision between couples at the end of their marriage or civil partnership.

Where a settlement has been reached by negotiation the provisions are made legally binding by having a consent order approved by the court. If this process is not followed the terms of the settlement cannot be enforced if a dispute arises thereafter. Consent orders are prepared by solicitors.

Financial remedy orders are governed by the Matrimonial Causes Act 1973 (and where a civil partnership is being dissolved, the Civil Partnership Act 2004).

Is the current law working effectively?

As fifty years have passed since the passage of the 1973 Act, the Government has asked the Law Commission to review whether the current law is working effectively and delivering fair and consistent outcomes for divorcing couples.

The Law Commission will consider the need for reform in specific areas, such as:

  • the discretionary powers given to judges over the division of financial assets, and whether there is a need for a clear set of principles, enshrined in law, to give more certainty to divorcing couples
  • whether there should be wider powers given to the courts to make orders for children over the age of eighteen
  • how maintenance payments for an ex-spouse or civil partner should work
  • what consideration the courts should give to the behaviour of separating parties when making financial remedy orders
  • orders relating to pensions and whether they are overlooked when dividing the divorcing parties’ assets
  • the structure of the system for making regular financial payments from one person to another after divorce
  • the factors judges must consider when deciding which, if any, financial remedy orders to make.

What about pre-nups?

A previous Law Commission report looked at ‘pre-nups’. It recommended the introduction of “qualifying nuptial agreements”. These would be enforceable contracts, which would enable couples to make binding arrangements for the financial consequences of divorce or dissolution. For an agreement to be a qualifying nuptial agreement, certain procedural safeguards would have to be met. Qualifying agreements could not, however, be used by parties to contract out of meeting the financial needs of each other and of any children. This recommendation has not yet been enshrined in law.

Pre-nups are not currently enforceable but the Supreme Court has held that they should be given “decisive weight” unless the agreement is unfair.

The Law Commission deals with review and reform of the law in England and Wales. Scotland and Northern Ireland having separate legal systems have separate law commissions.

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