The Impact of Divorce on Your Income
According to the latest research, women face a bigger income drop than men in the year after their divorce.
Our family law solicitors look at the latest research and explain how the structure of a financial settlement and childcare arrangements can affect your post-divorce income.
Contact Evolve Family Law for Specialist Family Law Advice.
Research into the impact of divorce on incomes
The latest research from Legal & General reveals that on average, women see their income fall by 50% in the year following their divorce. In contrast, men’s incomes fall by 30% in the year following the divorce. L&G refer to this as the divorce gap.
The L&G research goes deeper and reveals that:
- Nearly a quarter of women (24%) felt financially vulnerable after their divorce.
- Nearly a fifth (19%) of women struggled to pay their bills.
- 13% of women are concerned about the financial implications of retiring alone.
How about the men? Only 16% of men felt financially vulnerable, and only 10% of men struggled to pay essential bills. 8% of men were more concerned about their retirement plans and retiring alone after their divorce.
Some people may think the L&G research shows that women worry more about finances than men, but the data goes beyond the headlines and explains the rationale behind the divorce gap.
Research into the reasons for the divorce gap
The L&G research revealed the reasons for the divorce gap as:
- 63% of women felt the financial impact of stopping sharing finances and outgoings with a partner, compared to only 39% of men.
- Roughly a quarter of the people surveyed said that the wife was the primary breadwinner before the divorce, and in 22% of marriages, the husband and wife earned about the same amount.
- After their divorce, around a fifth of women returned to employment.
- Women are twice as likely as men to reduce their hours of work after their divorce because of parenting responsibilities.
- Only 13% of divorcing couples considered pension splitting when reaching a financial settlement. Women tend to prioritise non-pension assets when reaching a financial settlement. 28% of women did not receive pensions as part of their divorce settlement compared to 17% of men.
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Will a divorce have an impact on my income?
When a couple separates, it is common to move from a two-income household to a one-income household, resulting in a reduction in income. Unfortunately, it is often not possible to achieve a corresponding decrease in outgoings across the two households created by the separation.
It is crucial that your divorce solicitor looks carefully at the impact of divorce on your income, as that should massively influence the size and structure of the financial settlement.
Reaching a divorce settlement is a bit like putting a jigsaw together because the capital settlement (the share of the family home sale proceeds or the split of savings and investments) can influence how much income you need to meet your outgoings or your ability to pay spousal maintenance. For example, if you receive sufficient equity from the sale of the family home, you may be able to buy a new property either mortgage-free or with a modest mortgage. If you are the financially stronger spouse and receive a reduced share of the equity in the family home, you may not be able to afford to pay spousal maintenance and pay your bills.
Income support after a divorce
If a divorce will impact your income, then you can consider ways to enhance your income through:
- Spousal maintenance.
- Child support.
- Improving your earnings capacity through increasing your hours of employment or retraining.
Income issues after divorce
There can be income issues after divorce because with all three options, problems can arise, such as:
- The court prefers to achieve a clean break with no spousal maintenance payable in cases where a clean break is appropriate and there is sufficient capital to achieve that type of financial court order.
- Spousal maintenance stops if you remarry and may end if you cohabit with a new partner or if your former spouse loses their job or their income decreases.
- A former spouse may not comply with a spousal maintenance order, so you may be forced to apply to the court to enforce the order.
- Child support is not payable if parents agree or the court orders equal shared parenting under a child arrangement order. This rule applies even if your former spouse earns substantially more than you.
- You may agree on a financial settlement based on shared parenting, but your ex-partner then says they cannot share care, leaving you with additional childcare responsibilities.
- It may not be possible to increase your earnings capacity if you are undertaking the lion’s share of parenting or if you were out of the job market as a stay-at-home parent during the marriage.
Assessing if you will receive or be ordered to pay spousal maintenance
Whether the court will order that you pay spousal maintenance or receive it depends on a range of factors. These include:
- Whether you have young children to support, and whether the care of the children impacts your earnings capacity.
- Whether any disability or age impacts your ability to seek employment or increase your income, or your ex-spouse’s ability to do so.
- Your income and earnings capacity, and those of your former spouse.
- The extent of your respective reasonable outgoings.
- The length of the marriage.
- Other factors, such as the existence of a prenuptial agreement that sets out whether and how long spousal maintenance should be payable after your divorce.
Depending on the ages of the children and future earnings capacity, the court may order that a former spouse should pay spousal maintenance on a time-limited basis so that you can adjust to the divorce and reduction in household income. Alternatively, the court may prefer to award you more capital so you can buy a home with an affordable mortgage (compared to your ex’s financial settlement), meaning that you have lower monthly outgoings than your former spouse and therefore no requirement for spousal maintenance.
Talk to a family lawyer
Whatever your priorities, it is best on separation or divorce to take legal advice from a specialist divorce solicitor so you can understand the range of options for your financial settlement and work out which one is best for you and your family.
