Major Reforms To Financial Rights On Separation

A new government consultation looks set to reshape family law in England and Wales. The headline reform is a limited right for cohabitants to claim financial provision on separation – a right currently available only to married couples and civil partners. Alongside this are incremental, but important, changes to financial provision for spouses, and long-awaited recognition of the need to re-think how domestic abuse is approached in financial claims on separation.  

Many cohabiting couples wrongly believe they have rights akin to those of married couples, only to discover on separation that no such protection exists. The financial consequences can be profound, especially for women who have prioritised family over career.

It is proposed that cohabitants' claims be integrated into the existing financial remedy framework, with courts exercising the same powers, including pension sharing. However, these powers would be applied under different principles, with explicit stipulation that awards to cohabitants could not exceed those that would be made on divorce in otherwise identical circumstances.

For spouses, two principles would remain central: sharing and needs. Under the sharing principle “matrimonial assets”, assets built up by the parties during the marriage, the family home, and assets treated as shared, are divided equally, whilst each spouse retains their non-matrimonial assets such as gifts, inheritances and wealth generated before or after the marriage. Under the needs principle, the division is adjusted as required to meet both parties’ future needs. For cohabitants, only the needs principle would apply, and in a more restricted form. 

The consultation identifies three categories of need:

1. children’s needs;
2. the adults’ housing, income and pension needs;
3. discretionary needs - comforts rather than necessities. 

Whilst all three would be available to spouses, cohabitants would be limited to the first two. 

Cohabitants would therefore have no entitlement to share in their partner’s wealth beyond their core needs, even if it was generated during their relationship. However, as needs would be assessed by reference to the standard of living during the relationship, this could still amount to a substantial claim. 

To ensure the provision remains targeted, several restrictions are proposed: 

1. Only couples who have lived together as partners in an enduring family relationship, and either have done so for at least three years or have a child together, would be eligible.
2. Cohabitants could opt-out by agreement, provided each makes full financial disclosure and has independent legal advice.
3. Ongoing maintenance, rather than a one-off settlement, would only be possible in “exceptional” cases. This restriction is somewhat surprising given that short-term maintenance may often be more affordable and appropriate than capital provision.
4. Claims must be brought within two years of separation. 

For married couples, the government plans to make pre-nuptial agreements (PNAs) binding. Currently, they carry significant weight if certain criteria, including financial disclosure and legal advice, are met, and are sometimes upheld even without these safeguards if a judge is satisfied the parties understood what they were signing up to. Under proposals designed to increase certainty, PNAs would be binding, but only where safeguards including financial disclosure and legal advice are met (a “qualifying nuptial agreement”). The status of agreements lacking these criteria is not addressed. 

The court would retain the power to adjust the terms of a binding agreement if it fails to meet needs. Currently, some judges assess needs at a lower level if there is a PNA. The consultation adopts this approach, providing that where there is a qualifying nuptial agreement, only children’s needs and basic needs have to be covered, and not “discretionary needs”.

The consultation also engages with a much-criticised aspect of the current law: the treatment of domestic abuse in financial claims. Currently, abuse is only relevant to financial settlements in exceptional cases – where it has demonstrable financial consequences and is severe enough to provoke a “gasp” not merely a “gulp”. A 2024 research report, Domestic abuse in financial remedy proceedings, co-authored by Hunters partner Olivia Piercy and cited in the consultation, found that this approach can produce unfair outcomes for victim-survivors. 

The consultation acknowledges that the current approach risks trivialising abuse, which can have profound and long-lasting financial consequences. Rather than suggesting a solution, the consultation invites views on how domestic abuse could be more effectively recognised in financial proceedings, for both spouses and cohabitants, in a way that supports and empowers victim-survivors. 

The proposals mark a significant step towards a fairer and more coherent approach to financial provision on separation, and have been broadly welcomed by family lawyers. The consultation period now provides an important opportunity for lawyers, advisors and those who have experienced separation to ensure the law can provide fair and workable solutions for families in the years ahead.