More divorcing couples opt for ‘risky and inferior’ pension attachment orders

Divorcing couples are signing risky alimony or ‘destination’ agreements in increasing numbers, while ‘clean’ pot splits are holding relatively steady, new figures show.

Lawyers say pension garnishment orders are often the worst option because the pension holder could stop contributing to his fund and the deal would expire on his death.

“The rise in popularity of pension garnishment orders is puzzling because, in most circumstances, sharing the pension is more beneficial,” says Francesca Davey, a senior associate at the Nockolds family law team, which obtained figures on recent trends of the Ministry of Justice. .

“It is doubtful that many of the people who are going the pension garnishment route are being properly advised.”

Couples can now divorce within six months of first filing, even if one partner objects, and the process is mostly done online, including serving divorce papers by email, following reforms in the spring of 2022.

Financial settlements are still handled in a separate, parallel process that can continue after the divorce is final.

But many couples who divorce on their own may overlook alimony, even though it is potentially their biggest financial asset other than the family home.

There are three main options when it comes to alimony in a divorce: share it based on a clean break in an order to share alimony; a partner who uses part of the income to pay a former spouse after retirement; and offset its value with other assets.

Many experts suggest that you consult a financial adviser and a lawyer before settling on a divorce.

Francesca Davey: ‘Ignoring pension assets can be financially disastrous for someone with little or no retirement provision’

There were about 119,700 divorce filings in 2022, up from 108,300 in 2021, Nockolds found in a Freedom of Information request to the Justice Ministry. The 2021 figure was slightly below the 109,300 who were divorced in 2017.

But the law firm has found a trend towards ‘lower’ pension garnishment orders in the numbers, although the Justice Ministry stopped publishing data on them in 2018, when there were around 4,600.

Only partial figures are available for 2021, when there were around 4,200 requests for pension garnishment orders from April to December. However, the figure later skyrocketed to 7,700 in 2022.

Meanwhile, there were around 36,200 applications for shared pension orders in 2017, and this fell to 23,600 in 2021 and then rose to 26,300 in 2022.

However, despite the dramatic increase in the number of divorces in 2022, the share of requests for pension distribution orders remained at around 22 percent.

Says Davey: ‘The advantage of a pension distribution order is that the fund is immediately divided between the spouses, which means that the claimant knows what is happening in their pension fund now and can plan.’

‘A pension garnishment order is risky unless the pension is already withdrawn, as the pension holder may simply stop contributing to the plan. Another major drawback is that pension garnishment orders automatically end upon the death of the pension holder.

“If you don’t have a proper financial order and you remarry, then you lose your right to file for many of the usual financial orders, including an alimony garnishment order, and you will miss out on valuable claims.”

Source: Ministry of Justice and Nockolds

Davey says pension garnishment orders are “generally considered an inferior financial remedy,” but the rise in their use could be partly explained by the rise in “silver” divorcees, because they’re more suitable when a pension is already in retirement.

However, he adds that the average age of divorce has been increasing very slowly, so this does not adequately explain the sharp increase in pension garnishment orders in recent years.

The average age of divorce is 46.4 years for men and 43.9 years for women, and from 2005 to 2015 the number of men over 65 who divorced increased by 23% and that of women by a 38%.

Meanwhile, Nockolds also cautions that the online divorce process fails to emphasize to applicants the importance of legally binding financial orders, so divorcing couples looking to cut costs may assume that a personal agreement on finances is a must. enough.

Says Davey: ‘Private agreements are not legally binding and often fall apart over time, especially if one party starts a new relationship. It is very rare for courts to reopen a divorce agreement after it is finalized, regardless of whether one party is in breach of a personal agreement.’

Do the ‘DIY divorcees’ overlook pensions?

When it comes to alimony, many pension and legal experts fear that couples divorcing on their own are overlooking them, even though they are potentially their biggest financial asset other than the family home.

“It’s often incorrectly assumed that because a pension is in one spouse’s name and associated solely with their employment, it can’t be shared,” says Davey.

‘Ignoring pension assets can be financially disastrous for someone with little or no retirement provision. If a spouse has accumulated even a modest final salary pension, there is a good chance that it is worth considerably more than the average UK house.

“While most people will have a good idea of ​​how much their home is worth, far fewer know how much their spouse’s pension is worth, how much their benefits are worth, or even how many pensions they have or who their fund is with, leading to a bias in priorities when dividing matrimonial assets.’

Sarah Dodds, a senior associate at Kingsley Napley’s family law team, says it’s unusual to see pension garnishment orders in practice today, and surprising that Justice Department data suggests they’re on the rise.

‘While there are some quite specific circumstances in which a support garnishment order might be preferable, for most divorcing couples, a joint support order would be best.

‘The introduction of pension distribution orders in 2000 (in which a separate fund is immediately created for the beneficiary) was much heralded and, while the pension distribution order process is not perfect, it avoids some of the serious dangers of a pension garnishment order.’

Sarah Dodds: ‘For most divorcing couples, a joint support order would be best’

Dodds thinks it’s possible that the apparent rise in use of the latter is due to the rise of ‘DIY divorces’, where legal or financial advice is not taken and the cheating is unclear.

‘Perhaps they are mistakenly seen as a cheaper option than a full pension distribution order. Whatever the reason, there clearly remains an educational article to be done to help explain the benefits of pension distribution orders and why they should be considered. This needs to be addressed by both the Ministry of Justice and the family law community.’

Dodds adds that the Justice Department data also seems to support the worrying trend of ignoring pension assets at the time of divorce.

“This is concerning as alimony is often the most valuable asset and there is a fear that divorcing spouses will overlook it because they have not received legal advice or have tried to avoid the time and expense of instructing a expert specialized in pensions.

A Ministry of Justice spokesman says: ‘Our changes to divorce law have given couples more time to work out their problems and a better chance to do so amicably.

‘Our new online divorce system provides information on financial matters, including pensions to support families through financial procedures, which are separate.’

The government expected a temporary increase in divorce filings after the reforms in 2022, because people waited to file under the new process.

However, he notes that international evidence shows that long-term divorce rates do not increase by removing “guilt” from the process, and volumes are expected to return to previous levels.