Covid-19 has turned the world on it’s head. Here we take a look at how it may affect your divorce settlement.
If you separate, you need to sort out your finances – the house, pensions, investments, perhaps a family business. You might agree things between yourselves, or try mediation, or go to court. It’s early days and predicting the long term impact of covid-19 is impossible, but already we see the following:
- The courts are struggling. Judges are working remotely from home. Many hearings have been cancelled. Some are replaced with telephone conferences which are more administrative in nature, rather than effective ways to resolve disputes. More than ever, avoiding court is the best way forward. On the positive side, remote hearings can be effective for some types of dispute and can save time hanging around at court.
- The property market has stalled. There are hardly any transactions. No one is buying or selling. Prices are likely to fall, but at this stage it’s impossible to say how far or how long for.
- Share prices have plummeted. This impacts on the next item, pensions.
- Pensions are complex. In short, a bog standard personal pension will have fallen in value because the funds are invested in shares. Any CEV will be out of date. If your pension is being shared equally, this is fine, because it affects you both. If you are offsetting (one person keeps the pension and the other person keeps some cash) this may be unfair, because the person with the pension has taken the “hit”.
- Those with defined benefit, final salary public sector pensions (NHS, army) may be unaffected. The pension offers a guaranteed income and that guarantee still stands. Indeed in this market the CEV may have increased. Offsetting may no longer be fair for the opposite reason (e.g. the pension has retained it’s value but the house has fallen in value).
- Private sector defined benefit/final salary schemes are similar to 5 above. However, some pension funds will face funding issues – they can’t afford to pay the pensions they have promised – so may have to reduce CEVs.
- You may find it difficult to obtain CEVs. The government has said providers can take longer than usual to produce them. As you can imagine, all the people producing the data are working from home. Not all will be working. There may not be systems in place to address the above issues. Expect chaos.
- If you have a report (pension report, property valuation, business valuation) it is very likely to be out of date. Usually you can ask the expert to update the report.
- Businesses have been affected. Some are booming (delivery businesses, food businesses) and most are suffering.
Our general view is that the current circumstances need a careful, detailed approach. You may not get this from the court. You are better off trying to reach an agreement (which is harder than ever, because of the uncertainty) or try another option such as mediation or arbitration or having a private judge. Contact us for more information about this.