Divorce and Finances: Is England & Wales heading towards a new system? 

For many years, family lawyers have described financial claims on divorce as more of an art than a science.

Unlike some countries which have clear statutory formulas for dividing assets, the courts in England and Wales have a wide discretion when deciding how wealth should be divided. Whilst that provides flexibility to achieve fair outcomes in individual cases, it can also create uncertainty for separating couples.

That uncertainty has recently come under renewed scrutiny.

The Government’s recent consultation paper titled ‘a Fairer End to Relationships’’, published in June 2026, has generated considerable interest amongst family lawyers and the wider public particularly in terms of the proposed introduction of greater protections for cohabiting couples (discussed in detail here: Family Law Reform 2026: Divorce, Cohabitation & Inheritance). However, that consultation also revives an equally important debate about the law governing financial settlements on divorce. Those proposals stem directly from the Law Commission’s review of financial remedies, published in December 2024, which concluded that the current law governing financial remedies on divorce requires reform and has identified a number of key areas where change may be needed.

Why has the Law Commission Been Looking at This?

The law governing financial settlements on divorce is still largely based on a key piece of legislation that is over 50 years old: the Matrimonial Causes Act 1973. Whilst the legislation has been interpreted and developed through decades of case law, the statutory framework itself has remained largely unchanged.

When determining a financial settlement, the court must consider all of the circumstances of the case, including the parties’ income, assets, financial needs, ages, health and contributions. This gives judges considerable flexibility but can make outcomes difficult to predict with certainty.

The Law Commission was therefore asked to consider whether the current system remains fit for purpose and whether reform may be beneficial.

What did the Law Commission Find?

The Commission’s conclusion was significant.

It found that the current law lacks sufficient certainty and accessibility and that reform is needed. Whilst the Commission did not recommend a specific replacement system, it identified a number of possible models for future reform and highlighted areas which stakeholders repeatedly identified as problematic, to include:

• The broad discretion currently exercised by judges.
• The treatment of pre-marital and non-matrimonial assets.
• The law relating to spousal maintenance.
• The treatment of pensions on divorce.
• Nuptial agreements.
• Financial provision for adult children.
• The relevance of conduct in financial remedy proceedings.

The fact that these issues have been formally identified as potential areas for reform has reignited debate about the future direction of the law governing financial remedies.

Could we Move Towards Greater Certainty?

One of the central themes of the review is whether divorcing couples should be provided with clearer guidance regarding likely outcomes.

At present, two cases with broadly similar facts can produce different results because each case turns on its own circumstances and judges have wide discretion. Whilst that flexibility is often seen as one of the strengths of the English system, critics argue that it can make settlements difficult to predict and increase legal costs.

Some commentators have suggested that a more structured approach could help separating couples understand their likely position at an earlier stage, making settlements easier to achieve without court intervention. Others argue that family finances are simply too varied to be reduced to rigid formulas and that discretion remains essential to achieve fairness.

The debate continues and the question is no longer whether reform should be considered, but what shape that reform should take.

What is said about Pre-nuptial and Post-nuptial Agreements?

Whilst pre-nuptial and post-nuptial agreements have become increasingly common, particularly where one or both parties bring significant assets into the relationship, they are not automatically binding in England and Wales at the present time. Instead, the court retains ultimate discretion to decide whether an agreement should be upheld in the circumstances of a particular case.

Since the Supreme Court’s decision in Radmacher v Granatino [2010] UKSC 42, the courts have generally given considerable weight to nuptial agreements that have been freely entered into by both parties with a full understanding of their implications. However, uncertainty can still arise because each agreement is assessed on its own facts and the court retains the ability to depart from its terms where fairness requires. This can make it difficult for couples to predict in advance how robust an agreement will ultimately prove to be.

The Law Commission’s review considered whether there should be a clearer statutory framework governing such agreements, on the basis that qualifying nuptial agreements would generally be binding and not subject to the court’s discretion save that couples would not be able to contract out of meeting each other’s (and their children’s) needs. That greater certainty would allow couples to organise their financial affairs with confidence and reduce the scope for costly disputes in the event of divorce, although some critics caution against removing judicial discretion where doing so could lead to unfair outcomes.

Whatever form any future reform might take, as nuptial agreements are becoming increasingly common interest in them will undoubtedly continue to grow. Some surveys indicate that about 10% of couples in the UK enter into a pre-nuptial agreement before getting married, increasing to about 40% for those aged 18 to 35.

What About Non-matrimonial Assets?

The treatment of non-matrimonial assets remains one of the most complex areas of financial remedy law. Broadly speaking, non-matrimonial assets can include property acquired before the marriage, inheritances, gifts received from third parties and, in some cases, assets generated after separation. However, the distinction is rarely straightforward in practice. Over the years, the courts have developed principles to determine whether such assets should be shared and, if so, to what extent. The Law Commission identified the treatment of non-matrimonial property as one of the areas where greater clarity may be beneficial.

For many divorcing couples, particularly those entering a marriage with existing wealth or expecting to receive an inheritance, the current legal position can be difficult to predict. Whilst the courts are often willing to recognise the non-matrimonial nature of certain assets, those assets may nevertheless be taken into account where required to meet the parties’ needs. One of the questions raised by the Law Commission’s review is whether the law should provide clearer guidance about when non-matrimonial assets should, and should not, form part of a financial settlement.

For now, the best way to protect non-matrimonial property is to enter into a pre or post nuptial agreement for which specialist advice must always be sought.

What About Spousal Maintenance?

In England and Wales, it is possible for one spouse to pay maintenance to the other after divorce where the circumstances justify it. The duration and amount will depend on the facts of each case and require careful consideration of both parties’ income, earning capacity and needs.

The Law Commission identified spousal maintenance as one of the key areas where reform may be considered in the future. Some commentators favour clearer rules and greater certainty, whilst others emphasise the importance of retaining flexibility to protect financially vulnerable spouses. Any reform of the current rules will need to strike an appropriate balance.

What About Financial Provision for Children?

At present, the court has limited powers to make financial provision for children beyond the age of 18 in certain circumstances, such as where a child remains in education or has additional needs. The review highlighted this as an area where reform may be considered, reflecting wider questions about whether the law adequately addresses the realities of modern family life, including increasing numbers of young adults remaining financially dependent on parents for longer periods.

For divorcing parents, the issue can be particularly significant where there are ongoing university costs, private education expenses, disabilities, or other circumstances giving rise to continued financial dependency. The Law Commission did not recommend a specific solution but identified the subject as one requiring further consideration if a broader reform of financial remedies law is undertaken.

Are Pensions Receiving Enough Attention?

Pensions are frequently among the most valuable assets within a marriage. Despite that, many divorcing couples are guilty of focussing primarily on the family home and savings, sometimes overlooking pension provision entirely.

The Law Commission specifically highlighted pensions as an area worthy of further consideration. This reflects a wider concern within the family justice system that pensions are not always properly understood or fully addressed during financial remedy proceedings. Complex issues can arise when comparing different types of pension arrangements, particularly defined benefit schemes such as NHS, teachers’ and public sector pensions, where the reported Cash Equivalent Value may not accurately reflect the benefits available in retirement. In the majority of cases, specialist advice should be sought to assess the true value of the pension benefits and determine what pension sharing order may be required to achieve a fair outcome.

The consequences of overlooking pension assets can be significant, particularly where one spouse has prioritised career progression and pension accumulation whilst the other has taken on a greater share of childcare or domestic responsibilities. As people are living longer and increasingly relying on pension provision to fund retirement, ensuring that pensions are properly considered as part of any financial settlement is becoming ever more important. It is therefore unsurprising that the Law Commission identified this as an area requiring further scrutiny and potential reform in the years ahead.

Should Conduct Have a Greater Impact on Financial Settlements?

Another issue highlighted by the Law Commission is the role of conduct in financial remedy proceedings. Many people are surprised to learn that conduct will not usually affect the division of assets save in exceptional circumstances. This issue can be particularly concerning in cases involving allegations of domestic abuse, financial misconduct or the deliberate dissipation of assets.

The review considered whether the existing approach remains appropriate and whether greater clarity is needed around the circumstances in which conduct should influence a financial outcome. Whilst opinions differ on the extent to which personal behaviour should affect financial claims, this issue has received notable judicial attention in recent times (as discussed in this previous article – Conduct as “the Glass” Through Which Fairness Is Assessed) which has prompted further discussion amongst family lawyers about the need for reform.

Does any of This Change the Law Today?

The short answer is no.

The Law Commission’s review does not change the current law and there are no immediate legislative reforms on the horizon. Financial remedy cases continue to be determined under the existing legal framework and established case law principles.

However, the review is significant because it represents one of the most comprehensive examinations of divorce finance law in recent years. It provides a clear indication that reform is being actively discussed at a national level.

What Should Divorcing Couples Take From This?

Whilst legal reform may still be some way off, the review highlights an important reality: financial settlements on divorce are rarely straightforward.

Every family has different circumstances, different priorities and different financial resources. The outcome of any case will continue to depend on a detailed consideration of those individual facts.

For anyone contemplating divorce or negotiating a financial settlement, obtaining specialist legal advice remains the best way to understand how the current law applies to their particular circumstances and how future developments may affect them.

Please reach out to our Family Law team if you need advice or complete the form below.