Dealing with divorce – and your finances

    At a glance

• Divorce is often a long and demanding process, so start planning your next chapter as soon as possible.    
• Make a list of your expected income and expenditure to understand your future financial position. Don’t forget to review your pension and update your will.    
• You don’t have to navigate this alone. Working with legal and financial experts can make a real difference to the outcome.    

   
Going through a divorce is usually an emotionally difficult time but it also has ongoing financial implications. Amid the transition, it can be easy to overlook some important steps that might shape your financial future. We look at five key areas to help keep your finances on track for the long term.

Anecdotally the beginning of the year sees a spike in people considering divorce, with January sometimes named “Divorce month” in reflection of this. Law firms often report an increase in divorce enquiries in the new year compared to previous months.

In reality, statistics from the Ministry of Justice (Family Court statistics¹) show divorce levels are only slightly up compared to other times of the year. Between January to March 2025 there were 28,890 applications made over the course of the year. This fell to 26,412 between April and June 2025, while between July to September 2025 there were 26,153 divorce applications made.

However, there is no doubt that for many people the extended festive period can put extra pressure on strained relationships, while others see the new year as a natural point to make a fresh start.

Whatever the reason, deciding to divorce is a hard decision to make, and it is an unsettling time for any family. The difficulty is that, when emotions are running high, you are also expected to make some of the most important financial decisions of your life.

Here are five steps to help you feel more in control as you prepare for the next stage.

1. Define your priorities clearly 

Many people come out of a divorce feeling the outcome did not reflect what they truly needed. That is often because they did not spend enough time working out what is most important to them.

Creating a realistic list of priorities based on what you want your life to look like could add clarity and confidence.

There is no right or wrong when it comes to what you value the most, and the list should reflect your personal circumstances. For example, if you have spent more time running the household than building your career, that contribution should be recognised during discussions.

Similarly, if there are any physical items you would like to keep, think about them. That could be the family home, a car, perhaps a work of art you particularly like or something else of sentimental value.

There is no strict formula for who gets what in divorce. The best divorce negotiations come from openly discussing what each person needs for the future and working towards what feels fair to both sides.

2. Estimate your future income and expenditure
   
It can be hard to predict your financial needs for a new phase of life when so much is changing. But putting together even a rough outline can be immensely helpful.

Start by listing your expected income and all your outgoings. This will give you a clearer picture of how to approach financial discussions with your former partner.

Doing this early has many benefits – not least that it could bring you financial peace of mind. Having a basic plan removes some of the uncertainty about the years ahead.

When building a list, consider your long-term goals in addition to your day-to-day costs. To look at how much you have, your savings and investments are a great way to start.

Your finances need to work for you in the coming decades as well as the next few years.

3. Don’t forget your pension
   
Just as an easy divorce is rare, so is a straightforward financial settlement. There will likely be points of disagreement, especially over assets you might have shared or contributed towards in different ways.

As with other household roles, financial contributions are not the only measure of value. Responsibilities such as childcare or looking after the home should also be recognised when discussing pension arrangements.

If you have a pension to divide, it helps to understand the main options:

• Pension sharing
  In a pension sharing arrangement, the pensions are assessed and then split accordingly. Usually one person receives a pension credit to increase their benefits and the other a pension debit, reducing theirs. The split doesn’t have to be equal and can factor in other assets in the financial settlement. It is wise to have pension benefits professionally assessed to ensure the eventual splits are fair. This can only be achieved by court order but it gives the cleanest break because in the end each person has their share of the pension under their own control. 
  
  
• Pension attachment (earmarking)
  In a pension attachment, the pension holder agrees to pay a portion of their income or a lump sum to their spouse when they start drawing down the pension. There are disadvantages to this – for instance, the original pension holder will remain in control and therefore decide when the benefits will come into payment for both parties. In addition, the pension holder will carry the full tax liability, even on the portion passed to the ex-spouse. There is no clean split and the ex-spouses will need to remain in contact.
  
  
• Pension offsetting
  Instead of splitting the pension, couples can also agree to divide other assets differently. For example, one person keeps the full pension while the other receives a larger share of the family home. While this might feel like an easier short-term solution, giving up pension value can significantly affect financial security in later life.

4. Update your will

Your will is another important area to revisit. Many couples leave assets to each other to make sure the surviving spouse is financially secure. But divorce does not automatically invalidate a will.

After your divorce is finalised, your former spouse is treated as deceased for the purposes of your will. If you have appointed them as executor or trustee, that appointment becomes invalid - as well as any gifts you might have left them.

Making a new will ensures your wishes are clear and avoids complications in the future. It is also a good opportunity to review your overall estate and think about who you might want to give power of attorney to.

5. Team up with the right experts

Despite the often dramatic portrayals of divorce on TV, in reality it is more often a long, multi-stage process. While possibly having to make temporary arrangements to separate and move out, you also have to think about life after divorce – not to mention arrangements for your children if you have any.

Having the right support around you can make an enormous difference. A trusted lawyer can guide you through the legal stages, while a financial adviser can help you understand what different outcomes might mean for your future.

During this challenging period, it is also worth leaning on family and friends – especially those who have been through something similar and can offer reassurance.

The value of a pension with St. James's Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up.

Will writing involves the referral to a service that is separate and distinct to those offered by St. James's Place and are not regulated by the Financial Conduct Authority.

Source

¹Family Court Statistics Quarterly: January to March 2025 - GOV.UK