Understanding financial settlements

Posted on September 1, 2025

September was always traditionally a busy month for divorce solicitors - fresh from the last family holiday together and perhaps a time for an autumnal reset, but now it seems seasonal peaks and troughs balance out throughout the year and whilst clients may consult a solicitor one month, it can often be a few weeks or months before further action is taken and we get instructions to proceed.

At Pearson Solicitors we understand that divorce and separation can be an emotional and confusing time, especially financially. We act equally for those seeking advice to protect their assets, including their pensions, as well as those seeking a fair share of the marital resources

What is a financial settlement?

As part of any divorce or separation we work with our clients on a financial settlement which is essentially a legally binding agreement (court order) determining how a divorcing couple’s assets and liabilities will be divided.

A financial settlement is usually dealt with after the divorce process has started but can be negotiated during the divorce process.

“Any marriage breakdown, divorce or separation can have major implications for your financial situation as the assets of a once married couple will need to be divided. Income and assets now have to be shared between two households and a financial settlement is the way of dividing those assets depending on individual circumstances,” said Divorce Solicitor & Head of Family Law, Emma Kendall.

What does a financial settlement cover?

A financial settlement will cover the division of joint assets, including:

Property (e.g. the family home)
Savings and investments
Pensions
Income (including future earnings)
Debts and liabilities
Business interests

“We have many clients who think that once they are divorced that is an end to all ties between the couple, but we always warn people that the divorce itself does not conclude financial matters. It’s wise to realise the right to claim financial provision against your spouse does not end on divorce and so we would always advise that a financial order is obtained,” added Emma.

Types of financial orders

There are several types of financial orders in a divorce, but which one is most suitable for you depends on your circumstances.

Clean break order - will end all financial ties between the parties after the divorce. Neither can make a claim on the other’s future income or assets.
Spousal maintenance - are regular payments from one spouse to another, especially if one is financially dependent.
Pension sharing order - is a division or transfer of pensions between the parties.
Lump Sum order - payment of money from one spouse to another in a one off or a series of payments.
Property Adjustment Order - is a transfer or sale of a family home.

What happens if a financial settlement can't be agreed?

If the couple can’t agree, the court will decide based on Section 25 of the Matrimonial Causes Act 1973, which considers:

The welfare of any children
The income and earning capacity of both parties
Financial needs, obligations, and responsibilities
The standard of living during the marriage
The duration of the marriage
Contributions (financial and non-financial)
Any physical or mental disabilities
Any loss of benefits (e.g. pension rights) due to the divorce

Only a court-approved order is legally binding. An informal agreement, even if written down, does not prevent either party from making future claims unless it’s made into a court order and approved by a judge. A clean break order ensures that neither party can make future financial claims.

“Once an agreement is reached a financial court order is needed from the court to make it legally binding - the court order recording your financial settlement and dismissing future claims is one of the most important legal documents you will ever sign,” advised Emma Kendall.

How can we help?

For legal advice or further information on your divorce or finances contact our divorce and financial settlement solicitors on 0161 785 3500 or enquiries@pearsonlegal.co.uk

Please note that the information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Pearson Solicitors and Financial Advisers Ltd or any of its members or employees. Professional legal advice should be obtained before taking, or refraining from taking, any action as a result of this article.