Compromise key to an amicable settlement
By Peter Jones, Partner
The headlines make for grim reading: long term unemployment is at its highest level since 1996; income growth has slowed to 0.6 per cent, well below inflation; the Eurozone crisis deepens and the Bank of England has cuts its growth forecast to around 0.8 per cent, indicating that the economy won’t return to its pre-crisis status until 2014.
Add to that the withdrawal of interest-only mortgages and increases in Standard Variable Rates from major mortgage lenders, and each month adds to the tally of households which are feeling the squeeze to an unbearable degree.
So where does this leave couples whose relationships have already hit the rocks, for whom the financial climate brings the Catch-22 of heaping further stress on the pair whilst also leaving them with difficult financial decisions for the future if their marriage ends in divorce?
There’s no doubt that reaching a financial settlement affordable to both parties is more challenging than it was even five years ago. Here at Jones Myers, we’ve always endeavoured to find solutions that don’t rely on the wholesale selling of assets. This approach has paid off for our clients, especially now that the property market is in the doldrums and couples can no longer rely on the immediate sale of the family home to give them both enough to live on post-divorce.
Divorces are on the rise, with an increase of almost 5 per cent from 2009 to 2010. In addition, couples are splitting later in life – the average age for men divorcing has leapt to 44 in 2010 from 38 in 1990. This puts a much greater emphasis on pensions as a key element of the settlement as the pension pot has had more time to grow.
More than one in ten divorce settlements includes a pension sharing order – where the pension pot is split between the pair – and this can be applied not just to personal pensions but also to the top-up State Second Pension and its predecessor SERPS. Another solution is offsetting where one partner keeps their pension in exchange for giving up a greater share of other assets such as the house.
Pensions have always been in the mix, now it just requires a more innovative approach to maximise the benefits to both parties. Deals can be struck that incorporate delays or staged payments, working on the assumption that the economy will recover and individuals’ circumstances will improve.
Good negotiation is key: however sore couples are feeling, we would always urge them to think long-term, try to set aside their differences in the interests of finding the best solution all round. Disagreements invariably result in a protracted battle and higher costs, whereas a process such as mediation can be hugely beneficial not just in relation to the settlement but to agree residence and contact arrangements.
A good family lawyer will always identify the best solution for clients, no matter how challenging the financial climate is. The economic storm clouds may be swirling above but the silver lining can be found with a little ingenuity from the lawyers and compromise and understanding from the couple.