Separation law requires reform but remains stuck in the past for now - FT Adviser ‍

First published in FT Adviser on 21 January 2025

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One of the biggest issues for clients on divorce or the dissolution of their civil partnership is certainty – or the lack of it – regarding the division of their finances.

The legislation governing financial remedy orders is more than 50 years old, dating back to the Matrimonial Causes Act 1973 and augmented by a maze of case law, which lay clients will find difficult to navigate.

On December 18 2024, the Law Commission published the results of its analysis of the law surrounding financial claims on divorce and the dissolution of civil partnerships and possible options for reform. It found that the current law does not provide a “cohesive framework” where individuals can expect a “sufficiently certain” outcome.

Although the 352-page ‘scoping report’ made no recommendations, it suggested four potential models for reform across a sliding scale, with greater certainty at one end and wider discretion at the other.

The first option (“Default Regime”) would involve the creation of a set of rules to opt out of, which could involve sharing matrimonial property and keeping non-matrimonial property separate unless required to meet needs. This would mean very limited discretion for the courts. The second (“Guided Discretion”) would introduce a set of principles and objectives to guide the court’s discretion, which it could apply subject to the limited constraints set out in any reformed legislation.

A third (“Codification-plus”) proposes reform by way of incorporating settled law into legislation but the court would still have a broad discretion. It could also look at additional reform into those areas where there is settled law. The final option (“Codification”) would involve the court retaining a wide discretion but bringing settled principles into legislation with a view to providing a clearer framework.

The report made observations on areas that may impact clients, including pensions, spousal maintenance and prenuptial agreements.

Pensions

Pensions are one of the most misunderstood aspects of divorce or dissolution, viewed by most couples as “complicated and opaque,” according to the scoping report. Most clients do not understand the potential value of their pensions or mistakenly believe they belong to one spouse and should not be shared.

As the report notes, pensions are most commonly ‘offset’ against other assets such as the family home, but this can lead to potential unfairness in prioritising a short-term practical solution over long-term needs and treating often wildly different asset classes pound-for-pound. Simplification of this technical area is required, but given the lack of general momentum, the Pensions Advisory Group’s reports will remain the lodestar for many legal advisers, pending wider reform.

Maintenance

The duration and term of any spousal maintenance has always been a source of contention and contributes to much of the uncertainty surrounding finances on divorce. Current case law provides that spousal maintenance should only be of sufficient period and such quantum to allow the financially weaker spouse to adjust without undue hardship (joint-lives orders are increasingly rare). The scoping report considered whether the law should incorporate a formulaic approach (which could disadvantage vulnerable spouses) and a maximum term, with five years mooted save where there is serious financial hardship.

The report also overlooked the issue of provision for children over the age of 18 – a common cause for complaint among clients supporting the former once they have finished full-time secondary and higher education.  

Prenuptial agreements

Couples are increasingly entering into prenuptial (or postnuptial) agreements, which – although not legally binding – are better than no protection at all. In 2014, the Law Commission recommended the introduction of qualifying nuptial agreements which would be binding subject to certain safeguards being met. These safeguards have been sensibly observed by the legal profession to ensure that any agreement is upheld as far as possible.

As the scoping report points out, the model chosen (if any) by a future government may require the Law Commission to revisit its previous recommendations regarding prenuptial agreements. For the time being, if wealth protection is a priority, a nuptial agreement is essential.

Impact on clients

What seems clear from the Law Commission’s report is that any reform would likely retain a degree of discretion but with a greater steer for advisers and clients. That should provide some comfort for individuals anxious that their separation will become a clinical box-ticking exercise.  

However, reform is not on the immediate horizon: separating couples will still fall under the existing system, making early specialist advice essential as substantive progress is not likely until 2026 at the earliest.

Meanwhile, solicitors still hope the government will also address financial provision for cohabiting couples who currently have fewer rights and obligations than married and civil couples, often leaving the financially weaker party in dire need.

David Lillywhite is a partner at Burgess Mee

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