Your Guide To Divorce Financial Settlements

I recently advised a client getting divorced. They had already agreed, over a few informal coffees, to split everything fifty-fifty. After all, that was only fair, or so my client believed. However, after some careful valuations, he was horrified to discover that his wife’s pension was worth more than the house, their holiday home in Spain, and their combined savings. In addition, I had to inform him that although it was wonderful they were able to talk about their divorce financial settlement civilly and respectfully, their agreement was not legally binding, and neither of them had thought about what happens if one of them remarries or the other’s business suddenly takes off five years down the line.

The hardest aspects of divorce are reaching a financial settlement and making arrangements for your children. Although it may be tempting to try and use AI to work out these problems, chatbots cannot ask the right questions to uncover the true financial picture and apply the law to unique family situations and specifically to your own family situation. Getting early expert advice is essential if you want to ensure your financial settlement is fair.

What counts as a matrimonial asset?

Unless you have a pre or post nuptial agreement (and even then, these are not legally binding, although if they have been executed correctly the court will give them significant weight), almost everything you or your spouse built up during the marriage may count as a matrimonial asset, whoever’s name it sits in. Your family home, savings, pensions, business interests, and investments are all potentially part of the pot the court will look at.

Section 25 of the Matrimonial Causes Act 1973 directs the court to weigh all of your financial resources, not just the ones held jointly. Your family home counts as a matrimonial asset even if only one of you is on the title, because the property has usually housed the family throughout the marriage. Money you inherited or brought into the marriage can also be drawn into the matrimonial pot, particularly where your marriage has run for many years or you have mixed that money with joint finances.

The court does distinguish between matrimonial and non-matrimonial property. Non-matrimonial property, such as assets acquired before the marriage or through inheritance (if not mingled with other join assets), can be excluded from the sharing principle unless it has been “matrimonialised” through the parties’ treatment of the asset as shared over time. This concept was discussed in Standish v Standish [2025] UKSC 26, where the Supreme Court clarified that matrimonialisation depends on how the parties have dealt with the asset during the marriage. However, needs (particularly to be housed) will usually trump any argument that non matrimonial assets should not be shared with your spouse.

How does the court decide what is fair in a divorce financial settlement?

The court weighs the factors set out in section 25 of the Matrimonial Causes Act 1973, and no single factor decides your outcome on its own. These factors include:

✓  Resources available to both parties, both now and in the future.

      ✓  Length and duration of the marriage.

      ✓  Standard of living enjoyed by the parties.

      ✓  Contributions of each party (financial and non-financial).

      ✓  Conduct of the parties.

      ✓  Any benefits lost by either party as a result of the divorce.

 

The court gives first consideration to the welfare of any child of yours under 18. The House of Lords held in White v White [2000] UKHL 54  that there should be no discrimination between the roles of homemaker and breadwinner, and the “yardstick of equality” should be applied as a cross-check to ensure fairness. This principle is a cornerstone of financial remedy proceedings in England and Wales.

Can you keep the family home if you divorce?

The court’s decision on what happens to the family home depends on your and your children’s needs and what you can each afford, not on whose name is on the deeds. Ownership on paper matters far less here than most people expect.

If you have dependent children, the court may let the primary carer stay in the home if this is in their best interests, e.g. it would mean they do not have to change schools or move away from extended family. However, sometimes the family home must be sold so that both parties can be re-houses, particularly when care of children is shared as is often the case.

When it comes to dividing the family home, your options typically are a transfer into one of your names (purchasing the other’s interest), an immediate sale with proceeds split, or a deferred sale that keeps you in the home until a set event, such as your youngest child finishing school.

Although a deferred sale keeps you financially tied to your former spouse for longer, it is often necessary to achieve a fair settlement and ensure the best interests of your children. A clean break may be more desirable, but it is often not possible, and every family circumstance is unique. As a family law solicitor, my job is to advise you on the best options that puts your and your children’s needs first and protects your best interests.

Our guide on who gets the family home in a divorce takes you through each of these options and what they mean for your mortgage, your children’s stability, and your own finances.

What happens to your pension?

Your pension often turns out to be worth more than your house, yet pensions often get far less attention than property during a divorce. You can divide a pension through a pension sharing order, a pension attachment order, or by offsetting its value against other assets.

A pension sharing order transfers a set percentage of one pension into a brand new, separate pension in your name. A pension attachment order instead earmarks part of your former spouse’s pension for you once it comes into payment, but that arrangement ends automatically if you remarry and keeps you financially connected to your former spouse for years. Pension earmarking is rare given this disadvantage and pension sharing is usually the best option. Offsetting swaps your share of a pension for other capital, often a bigger share of the family home, which suits you if you need housing certainty now rather than income decades from now.

The cash equivalent transfer value used to value most pensions can understate what a defined benefit pension, such as an NHS or teacher’s pension, is worth to the person who holds it. Where a defined benefit scheme is involved, or the pension values are large relative to your other assets, an independent pensions on divorce expert can produce a report showing what the pension is really worth to you or your spouse, not just its transfer value on paper and what share of the pension needs to be transferred to achieve equality of income based on the current pension values. Our guide on how pensions are divided in divorce sets out each option in more depth.

Option	What happens to the pension	Best for you if
Pension sharing order	Splits into two separate pensions	You want a clean break on this asset now
Pension attachment order	Stays with the original holder, paid to you later	Sharing is not possible under the scheme rules
Offsetting	Retained in full by one spouse	You need housing certainty rather than future income

 

What are your options if you cannot agree on the divorce financial settlement?

If you and your former spouse cannot agree, you still have several routes before court becomes necessary, and most couples settle without a contested hearing.

      ✓  Mediation puts you and your former spouse in a room with an independent, trained mediator who helps you reach your own agreement rather than deciding for you.

      ✓  Arbitration you both appoint and pay an arbitrator whose decision becomes legally binding once you have agreed to be bound by it.

      ✓  A private Financial Dispute Resolution hearing puts your case in front of an experienced lawyer or retired judge who gives you a frank, non-binding view of what a court is likely to decide, which often prompts settlement on the spot. These are becoming an increasingly popular way of resolving disputes.

Rule 3.3 of the Family Procedure Rules 2010 requires the court to consider, at every stage of your case, whether non-court dispute resolution is appropriate for you. If you refuse to engage with these options without good reason, you risk a costs penalty later, so weighing them carefully is worthwhile even if court still feels like the safer option right now.

How do you make the divorce financial settlement final?

You make your settlement final by asking a judge to seal a Consent Order, the document that turns your agreement into a legally binding, enforceable court order. Without one, any agreement you reach, however detailed, carries no legal force, and either of you can bring a fresh financial claim later.

Applying for a Consent Order means you both sign the draft order, complete a Statement of Information on Form D81 setting out your finances, and submit these alongside the correct court fee. A judge reviews every Consent Order to check the terms are fair before sealing it, and you will not usually need a hearing for this step.

A Consent Order can include the transfer or sale of your home, lump sum payments, a pension sharing order, spousal maintenance, and a clean break clause that dismisses future claims between you. Once sealed, capital provisions like a property transfer cannot normally be changed, though spousal maintenance can be varied later if your circumstances shift substantially.

What does a clean break mean?

A clean break gives you a permanent end to financial claims between you and your former spouse, so neither of you can come back later for a share of income, savings, or a pension you build up afterwards. Section 25A of the Matrimonial Causes Act 1973 requires the court to consider a clean break in every case.

You can usually achieve an immediate clean break on capital matters like the family home, even where spousal maintenance needs to run for a fixed period first. If you gave up a career to raise children, the court may order spousal maintenance for a set number of years before the clean break takes effect, giving you time to become financially independent. Once sealed, a clean break order is very difficult to reopen, so getting the terms right the first time matters more than reaching a quick agreement under pressure.

Talk to Purcell Solicitors

If you are facing a financial settlement and are not sure where to start, we can talk you through your options and what each one means for your situation. Our family law team has negotiated settlements across Milton Keynes, Bedfordshire, Northamptonshire, and the Thames Valley for over 20 years, and you can reach us through our contact page.

Please note this article does not constitute legal advice.

For more information please see below.

How Are Pensions Divided In Divorce?

What Is A Clean Break Order?

Frequently asked questions