UK couples are spending an average of £14,561 on legal and lifestyle costs when they split up, an increase of 17% since 2014 when it totalled £12,432, Aviva’s Family Finances Report shows.
Moving out of the marital home can add £144,600 to this bill on average for those buying a new property (16%), or more than £35,000 for those renting (51%).
The Winter 2018 edition examines the hidden cost of divorce and separation and how this has evolved in the last three years, with the UK’s ‘divorce bill’ having now risen to £1.7 billion annually, up from £1.6 billion in 2014. It also explores the wider impacts of relationship breakdowns on financial behaviour and the additional costs of having to find a new home.
The findings come as the latest official data highlighted the number of divorces in England and Wales increased by 6% between 2015 and 2016 to 106,959 – the first rise since 2009.
Aviva’s findings indicate the majority (68%) of couples who divorce or separate have financial issues to resolve, with the process taking on average 14 and a half months, three months longer than in 2014. With 34% stating they found the process worse than expected, the report urges couples to ensure they have an equal understanding of household finances to prevent long-term financial plans from going off-course in the event of a relationship breakdown.
The average divorce or separation cost excluding any accommodation costs now stands at £14,561 per couple, up from £12,432 in 2014. The biggest drivers of the increase include legal fees, up by 109% from £1,280 to £2,679; redecorating a previously shared home, up by 73% from £1,370 to £2,369; and additional legal fees as part of a child custody battle, increasing by 62% from £3,500 to £5,671.
Legal fees are the most common cost when a relationship ends, encountered by 54% of couples, followed by setting up a new home (40%) and annual child maintenance payments (21%).
Alongside the impact of the many one-off costs resulting from divorce or separation, the breakdown of a relationship can also affect where people live afterwards and their ability to get back on the housing ladder after selling a shared property. 46% of home-owning couples sell their property leading to both partners having to find a new home, in addition to those individuals who move out whilst their partner remains in the former joint home.
16% buy a new home following separation, with an average cost of £144,600 per person, rising from £94,100 in 2014. This is significantly lower than the average UK house price (£226,185), suggesting the likelihood that people are downsizing to a smaller property.
51% move to the rental market after their divorce or separation, spending an average of £7,519 each year on rent. While individual circumstances will differ, the average time spent as a tenant post-separation is 4.7 years, with almost one in five (19%) renting for more than a decade after splitting with their former partner.
Aviva said that with house prices continuing to rise across the country, renting post-separation could become a more permanent circumstance for many people. Of those currently renting as a result of their split, 70% feel that they will be unlikely to buy a property in the future.
For a significant proportion of separated couples (16%), affordability remains such a concern that they remain living together in the same house because they can’t afford to move. This is especially prevalent among former couples in London (28%), where property prices are far higher than the national average, with 39% having carried on this arrangement for longer than three months.
Aviva’s findings also illustrate how people are compelled to make changes to supplement a potential drop in household income as a result of divorce or separation.
31% of those who have split say they have dipped into their savings for financial support, while 26% admit using credit cards for this reason. 23% have also borrowed from friends and family to tide them over.
Moreover, 6% have resorted to cancelling or cutting back their protection cover, with the same number cancelling or reducing their pension contributions in order to supplement income after they divorce or separate.
Paul Brencher, Aviva UK health and protection director, said: “The breakdown of a marriage or long-term relationship is likely to be one of the most emotionally demanding life events for people who experience it. Such circumstances are made all the harder due to the lack of preparedness by many.
“Without taking away from the primary emotional strain, there are other significant costs which have the potential to cause further disruption to family units. Aside from the costs of a new home, separating couples across the UK spend £1.7bn getting back on their feet after the breakdown of a relationship on costs including legal fees, buying a car or paying for a newfound need for childcare. As a consequence, it is little surprise that they are drawn towards their savings for support or borrowing from friends and family. Many additionally find themselves priced out of the property market.
“While it may seem completely unnecessary to plan for such an unfortunate life event, it is important that both partners in a relationship take an active interest in their financial affairs, even if one tends to take the lead. Ensuring a better mutual understanding of household finances can make navigating the process more manageable if the relationship takes an unforeseen turn, while preventing long-term financial planning from going off course.”