Negotiating a fair financial settlement after divorce – key considerations

What does a fair financial settlement really mean?

A fair settlement does not necessarily mean a 50/50 split. Instead, the goal in reaching a fair financial settlement is to ensure that both individuals can be housed and maintain a reasonable standard of living post-divorce, especially where children are involved.

Key factors the Court will consider

When determining financial settlements, the courts in England and Wales apply Section 25 of the Matrimonial Causes Act 1973. Key factors to be considered include (but not limited to):

• The income, earning capacity, and financial resources of each person;
• The financial needs, obligations, and responsibilities of each person;
• The age of each party;
• The duration of the marriage and pre-marital cohabitation;
• Contributions made by each party, including non-financial ones (e.g. homemaking or childcare);
• Any physical or mental disabilities; and
• The welfare of any children.

These factors help the court decide what is fair for both parties when determining a financial settlement in each case.

Pensions and long-term financial security

Options for dividing pensions include:

• Pension sharing orders: Splitting pension assets between both parties.
• Pension offsetting: One party keeps the pension, and the other receives assets of equivalent value.
• Pension attachment orders: Redirecting pension payments upon retirement.

It is essential to seek expert advice to understand the long-term implications of pension division.

The family home and living arrangements

The family home is often the most emotionally and financially significant asset. Decisions may include:

• Selling the home and dividing the proceeds;
• One party buying out the other’s share; and
• Deferred sale (e.g. Mesher order) allowing one party to remain until a future event (like children turning 18).

The priority is often to ensure stability for children, but both parties’ housing needs must be considered. Both parties’ mortgage raising capacity will be taken into consideration.

Income, earning capacity, and financial needs

Each party’s current and future earning potential is assessed, along with their financial needs. This includes:

• Living expenses;
• Housing costs;
• Childcare and education; and
• Retirement planning.

If one party has sacrificed career opportunities for the marriage or family, this will be taken into account. The contributions made by the homemaker and breadwinner are considered to be equal.

Maintenance and ongoing financial support

Spousal maintenance may be awarded if one party cannot meet their needs without support. Types include:

• Ongoing maintenance: Regular payments for a set period or indefinitely.
• Lump sum payments: One-off payments to meet specific needs.
• Clean break orders: Ending financial ties completely.

It is important to note that child maintenance is calculated and dealt with separate to any spousal maintenance.

Mediation, negotiation, and alternative dispute resolution

Many couples resolve financial matters through:

• Mediation: A neutral third party helps reach agreement;
• Collaborative law: Each party has a lawyer, and all commit to resolving issues without court;
• Arbitration: A private process where an arbitrator makes a binding decision; and/or

These methods are often faster, less adversarial, and more cost-effective than litigation.

When Court intervention may be necessary

Court may be required when:

• One party refuses to disclose financial information;
• There’s disagreement over asset values or entitlements;
• Mediation or negotiation fails; and/or
• Urgent action is needed to protect assets.

While court can provide clarity and enforceability, it is usually a last resort due to cost and stress.

Family Law experts

Our experts are specialists in negotiating financial settlements on divorce and for separating couples who are not married. Should you need further advice, please call our Family team on 01202 636223 or email MatrimonialDept@ellisjones.co.uk .