Divorce – Research into the financial impact post divorce, particularly on women

At Blanchards Law, we know only too well the impact that Divorce has on all aspects of an individual’s life.  The consequences are far reaching and can be detrimental to their mental and physical health, as well as  affecting them financially. For women, the financial consequences can often be particularly severe.  Recent research conducted by Legal & General Insurance has shed light on the long-term effects of the “no-fault” divorce system on women’s incomes. In this blog, we will explore these findings and discuss the broader implications of no-fault divorce on women’s financial well-being.

The Shift to No-Fault Divorce: A Brief Overview

In April 2022, England and Wales introduced a new law that allows couples to divorce without the need to assign blame. Previously, spouses seeking divorce had to prove fault such as adultery or unreasonable behaviour if they wanted a quicker process. The introduction of no-fault divorce was aimed at reducing conflict and making the process less acrimonious, particularly in families with children.

However, while this reform was widely celebrated as a positive step toward reducing the emotional toll of divorce, it also prompted concerns about the continuing  financial ramifications for women, who often bear a disproportionate burden in divorce settlements. No-fault divorce had had no impact on that.

Divorce and Financial Impacts on Women

Legal & General Insurance’s research highlights a disturbing trend when it comes to post-divorce financial security for women. The findings highlight that women often experience a reduction in their income following a divorce, and this trend is exacerbated by the lack of financial support during and after the separation process.

Some key statistics from the report include:

1. Income Reduction: On average, women experience a 25% decline in income after divorce. This is primarily due to changes in household structure, the need to care for children, and the challenges of re-entering the workforce.
2. Childcare Responsibilities: Women are more likely to take on primary caregiving responsibilities for children, which limits their ability to work full-time or pursue higher-paying career opportunities. According to Legal & General, 41% of women said that childcare commitments had a direct impact on their ability to earn a stable income after divorce.
3. Pension Penalties: Legal & General’s research found that women also face long-term financial consequences when it comes to pensions. Women tend to have lower pension pots post-divorce, which can lead to a disparity in retirement income. This disparity is often the result of career breaks taken for childcare, which affect contributions to pensions, as well as the division of assets during divorce proceedings.
4. Unequal Asset Division: Even with no-fault divorce, the financial settlement remains a contentious issue. Women can end up with a smaller share of marital assets, which can include the family home, savings, and investments. According to the research, one in five women report that they were not given a fair share of assets during their divorce settlement.

Why Do Women Suffer More Financially After Divorce?

Several factors contribute to the disparity in financial outcomes between men and women post-divorce, in addition to the above:

1. Income Inequality: Even before divorce, women, on average, earn less than men, which means that they are more likely to face financial struggles once their marriage ends. The gender pay gap, which persists in many industries, means that women have less earning potential to support themselves and their children after divorce.
2. Historical Divorce Trends: Women may have stayed in unhappy or unhealthy marriages due to financial dependency. When a marriage ends, the sudden shift to managing finances alone can lead to financial instability, especially if women were not involved in managing the couple’s finances before the divorce.
3. Limited Support Systems: While the no-fault divorce law reduces conflict during the divorce process, it doesn’t address the underlying issue of financial inequities. Women may not always have access to the resources needed to ensure a fair settlement or to negotiate a more favourable outcome, particularly in cases where there is a power imbalance within the marriage.

How to  Safeguard your financial future if going through a divorce

While divorce can be an overwhelming and difficult experience, there are steps both parties can take to protect their financial security both during and after the process:

1. Understand Your Financial Rights: It is crucial for individuals facing divorce to educate themselves about their legal and financial rights during the process. Consulting a specialist lawyer in family law will assist as well as taking advice from other professionals such as Independent Financial Advisors.
2. Take Control of Your Finances: Both parties should make an effort to be involved in and understand the  decisions made during the marriage as regard to their finances. This includes being informed about assets, liabilities, income, and investments. In the event of divorce, this knowledge is crucial to ensure a fair distribution of assets. We know this can be difficult, particularly if up until now, your spouse has taken the lead on family finances.
3. Consider Post-Divorce Financial Planning: After divorce, it would be advisable for individuals to work with financial planners to create a strategy for rebuilding their financial future. This may include budgeting, saving for retirement, and seeking additional sources of income.
4. Seek Support for Childcare: Accessing resources like childcare subsidies or assistance programs can help with budgeting.

The introduction of no-fault divorce was a landmark shift in how divorce is perceived and processed, but as Legal & General Insurance’s research highlights, it is clear that financial inequities remain a significant concern particularly for women post-divorce. As we move forward, it is essential to continue advocating for reforms that address these disparities, whether through more equitable asset division, better financial education or a better understanding of the rights available to both parties in a divorce process.

Divorce is challenging, but with the right financial guidance and support systems in place, both parties can navigate this difficult life transition and work toward securing a more stable financial future.