Many people find themselves broke or in debt after divorce, study finds

The Fair Shares project is the first nationally representative study which examines the financial arrangements of divorcing couples in England and Wales. The new report from our team shows that most couples have very modest levels of assets to divide. In fact, 17% of divorcees questioned in our survey had no assets, while 23% were left with nothing or only debt after their divorce.

Divorce is a financial shock that ex-spouses – and their children – must face as they adjust to life in two homes. This impact can be particularly harsh and long-lasting for older women and those with children.

The study, led by one of us (Emma) and funded by the Nuffield Foundation, surveyed 2,415 people who had divorced up to five years earlier and surveyed 53 recent divorcees.

Couples perhaps have less wealth to share than we think: 28% of divorcees in our study lived in rented accommodation and therefore Apart from their pension, they had very little capital to share. So it’s no surprise that 21% of them were left with less than £25,000 ( 27,101,500 Chilean pesos).

The average net worth of assets, including property and pensions, held by divorcing couples at the time of their divorce was £135,000, including those who had nothing or just debt.. More than a quarter (28%) had assets of less than £100,000, while just 9% had more than £1 million.

Our workshop found that wives generally had lower incomes than their husbands during marriage, usually due to child care responsibilities that prevented them from working full time. This meant that divorcing wives typically accumulated lower pension funds than their husbands, portending greater financial hardship in the future. . UK government data They also show that mothers spend more time than fathers on chores. unpaid domestic and childcare tasks.

The law allows a spouse to transfer their pension rights to their ex-spouse in the event of divorce. This can be used to help offset one spouse’s loss of their pension contributions due to caring responsibilities. However, our study revealed that only 11% of divorced people who were not yet retired had reached an agreement to share the pension, and among them, only a fifth (22%) shared the pension equally.

This lack of consideration of pensions seemed to reflect a general lack of knowledge or understanding of them, and even their finances in general.

Nearly four out of ten (38%) of divorced people felt they had little knowledge about their ex’s finances during the marriage. A third did not know the value of their own pension. And 10% did not know the equity (how much of the mortgage had been paid off) in the former marital home. This meant they were potentially in a weak position when it came to negotiating with their ex over how to split their assets.

However, 12% of those surveyed said they did not seek information or advice during their divorce , and only a third had used a lawyer to help them make financial arrangements. Many divorced people have been deterred by fear of legal costs.

However, unlike the popular misconception when legal or mediation costs have been incurred, The costs were relatively modest: 24% of divorcees had to find less than £1,000, and 18% had costs of between £1,000 and £3,000. Just 9% incurred expenses of £10,000 or more.

However, even modest costs They can make legal aid out of reach for some people.

The long-term impact of a bad deal is demonstrated our data comparing the household income of divorced people at the time of the survey, up to five years after their divorce . Divorced women, especially mothers and older women, tend to be in a less favorable situation than men, even when they have found a new partner. For example, only 29% of women with dependent children and 22% of women over 50 without children had a household income above £35,000. , compared to 45% and 32% of men.

The law that applies to the economic consequences of divorce is 50 years old. In 2020, Baroness Fiona Shackleton presented a private member’s bill in the House of Lords, arguing that it would be much easier for couples to manage their agreements without help if there was a presumption a clear law that marital property must be divided 50/50.

But our study found that a 50/50 split would not reflect the needs or priorities of most divorced people. Only 28% had their assets distributed approximately equally; most focused on those who needed the assets most or distributed them based on who had legal ownership. For the divorced, “justice” consisted of satisfying their needs or getting back what they had brought to the marriage, not by dividing a very small cake into two even smaller halves.

We believe it is not the substantive law that needs reform, but the means by which divorced people can access advice and support. Ensure divorcing couples have access to affordable information, advice and support. , Appropriate, authorized care is essential to ensure that the agreement you obtain is fair to both of you and also protects your children.

A fair deal is one that takes into account all your available assets – including pensions – so that everyone can better adjust financially to life after their marriage ends.

* Emma Hitchings She is Professor of Family Law at the University of Bristol.

** Gillian Douglas She is Emeritus Professor of Law at King’s College London.