After the order: the settlement is not the finish line

A client can emerge from proceedings with a substantial pension credit, cash, property and investments, yet still struggle with basic questions:

• Can the family home be kept?

• How will school fees be paid?

• What income is safe to draw?

• Which assets must remain accessible?

A large balance sheet is no cure for low financial confidence. Where one spouse managed the family finances throughout a long marriage, the other may be capable and closely involved in family life but unfamiliar with pensions, tax and investments, just as they are required to make some of the biggest financial decisions of their life.

Please note, tax treatment depends on individual circumstances and is subject to change. The value of investments can fall as well as rise and clients may get back less than invested.

A settlement is judged in ordinary life, not only by the wording of the order. An outcome that is fair on paper but difficult to implement can quickly become another source of uncertainty.

Financial planning need not wait for funds to be transferred. Once the likely value and timing of a settlement are reasonably clear, cashflow modelling can show what different housing budgets would mean, whether planned expenditure is sustainable and how decisions taken now may affect future income.

This tests proposals against real life. A consent order cannot pay a school bill or show whether retaining a particular property would leave too little liquidity. In more complex cases, modelling can also account for businesses, trusts, overseas property, deferred remuneration and assets with different tax characteristics.

Early involvement makes the handover less abrupt. The client can meet the financial planner and investment manager while the legal team is still in place, so assumptions can be agreed, accounts prepared and immediate cash needs identified. The settlement then arrives into an existing plan rather than a vacuum.

Not every client is ready to make a series of long-term financial decisions as soon as proceedings end.

One client, worn down by an acrimonious divorce, was unsure whether their former spouse would comply with the order. The family’s immediate need was simpler: a holiday and some breathing space.

An account was prepared so that, if the settlement arrived, it had a secure destination. When it did, part was held in cash and short-dated gilts, with maturity dates aligned to known costs such as school fees. The client could see the plan working before being asked to consider inflation, investment risk and a more balanced long-term portfolio.

This was not procrastination but sequencing. After months of disclosure, evidence and negotiation, creating space can be the quickest route to progress.

A pension sharing order establishes an entitlement. It does not determine how that entitlement should support the client’s future.

That distinction is illustrated by an example scenario involving a woman in her 70s. Her former husband had substantial defined benefit pension income and the final pension credit was £905,000, transferred externally into a self invested personal pension (SIPP).

The pension expert’s report had provided an illustration based on equalising income. That was an important part of the legal process, but it did not settle the implementation questions. The client wanted dependable income, but she also needed access to capital to meet the costs of buying and improving a new home.

In this case, the pension credit did not provide tax-free cash. A medical assessment identified that the client qualified for an enhanced annuity rate, despite having only relatively minor health issues.

Of the £905,000 credit, £687,230 was used to purchase an annuity paying £63,730 gross a year, with increases linked to the retail prices index (RPI). The remaining £217,770 was retained in flexi-access drawdown, allowing taxable lump sums to be taken when needed.

A separate review of her state-pension entitlement under the rules applying to her pre-April 2016 claim increased it from £4,500 to £8,100 a year. The final structure therefore provided guaranteed gross income of £71,830 a year, alongside a flexible pension pot of £217,770.

The value of the advice was not measured by how much of the settlement could be placed into an investment portfolio. It lay in combining medical underwriting, pension implementation, state-pension analysis and cashflow planning to produce the right balance of security and flexibility.

For this client, what good looked like was a reliable income, money available for her home and less need to worry about markets. For a younger client, it might look entirely different.

The scenario described is not based on one individual client and is for illustrative purposes only. It is not typical or representative and is not a guarantee of outcomes.

Drawdown income is not guaranteed and depends on investment performance, withdrawals and longevity.

Annuities are generally irreversible and depend on provider terms and solvency.

Settlement planning is built on assumptions. Life has a habit of ignoring them.

The eventual house purchase may cost more than expected. School fee arrangements can change. A client may return to work, receive an inheritance or decide to support adult children. Health, tax rules and family priorities will also evolve.

Cashflow modelling should therefore be treated as a living plan, not a verdict. As estimates give way to actual expenditure, it can show what has changed, what remains affordable and where the strategy may need to adapt. Decisions can then be made in context rather than in isolation.

Ongoing advice can also achieve something less tangible but no less important: financial confidence. A client who once found pensions, investments or tax unfamiliar can learn to test assumptions, question recommendations and make decisions independently. Confidence is not conferred by the court order. It is built through clear explanations and repeated experience.

The shift from recipient of a settlement to confident decision-maker is one of the most valuable outcomes of ongoing advice, and one no schedule of assets can capture.

For a family lawyer, recommending a financial adviser is an extension of professional judgement: the lawyer’s reputation travels with the referral.

Technical competence is only part of the test. Clients need patience, clear explanations and the freedom to ask basic questions without feeling patronised. Lawyers need responsive communication, concise outputs and confidence that financial advice is aligned with the legal strategy.

The legal relationship may end once the settlement is implemented but the client’s need for support often does not. A good handover should therefore feel like continuity, not another beginning. The client knows who to call, the adviser understands the history and the lawyer knows the client has not been left alone with unfamiliar assets and a fresh list of decisions.

Divorce does not end financially when the order is sealed or the money transferred. It ends when the client understands what they have, what it can support and how the plan can adapt.

For more details on how Evelyn Partners can support your clients, please speak to your usual contact.