The start of the new year is often boom time for divorce lawyers, but 2024 may be different as new research shows the cost of living crisis has delayed more than 270,000 couples from splitting.
Financial pressures delayed 19% of divorces, researchers at Legal & General found. The impact has been particularly pronounced since 2020, with income concerns, cost of living pressures and the price of divorce all cited as reasons to postpone the split.
Neil Russell, the head of family law at Seddons, said he frequently spoke to couples with this issue. “People always think financial pressures break couples up but they also keep them together. What with inflation and interest rate rises, it has put a lot of pressure on families because they can’t afford to sell and buy, because they can’t afford the new mortgage rates and they can’t afford to maintain two households, so a lot of people stay together.”
Russell said when the economy suffered, finances became an increasing issue for those wanting to separate. He said this applied across income brackets and caught out many middle-class couples trying to separate.
“It’s a big factor. When the economy is doing well it’s easier to get divorced because you can buy homes, sell homes more quickly, and the economy is more fluid. When it’s tough it’s harder,” he said.
Nearly half (48%) of divorcees saw their incomes shrink by about 31%, leaving them with an average of £9,700 less each year, the research found.
The first working day after the new year is often nicknamed “divorce day” because so many people make inquiries after Christmas. The Pensions and Lifetime Savings Association (PLSA) has released online guidance on how private workplace pension scheme providers could help spouses splitting up, to coincide with the day.
Though 272,000 divorces were reportedly postponed due to money concerns, just one in five couples discussed their pensions when dividing their assets, while 58% considered the value of their family home.
Paula Llewellyn, the managing director of Legal & General Retail, said: “When people divorce, money is always an important factor, especially during the challenges of the cost of living crisis. However, as our research shows, a separation can have long-term implications for people’s finances.”
Two in five divorcees believed the process ends up financially unfair and that one of the parties came out on top. Fewer than a third signed clean break orders, which can protect from a future claim from their former spouse.
Llewellyn said: “Many couples have not even sorted the necessary paperwork to ensure they have a clean break from their financial obligation to one another.
“By consulting a financial adviser, people increase the likelihood of a divorce being fair and equal. While the number of people seeking out this support has increased in recent years, we need to encourage more couples to take this step.”
The impact of divorce on retirement funds can be significant, with an average of £63 less put into pension pots each month due to the financial strain. About 29% of divorcees actively waived their rights to the value of their pensions, the research found.
Joe Dabrowski, the deputy director of policy at the PLSA, said: “Understandably, working out how to split pension assets is not the first priority for most separating couples.
“But it is really important to make sure both parties are provided for in retirement, especially when one party has been the primary earner and built up a pension, while the other – usually because they have taken on more family caring responsibilities – has not.”