Estimates have put the missed amount of pension savings that could be included in divorce settlements at between £2bn and £4bn a year.
The exact figure has proven a challenge to calculate because of the complex nature of divorce settlements, which can include large assets such as family-owned property.
There is an acknowledgment that the complexity of pensions is exacerbating the gender pensions and pay gap.
A spokesperson for The Law Society told FT Adviser pensions were seen as too complicated and women often preferred to settle in favour of more exoteric assets such as the family home.
“I have sat down with clients and pleaded with them to consider looking at their spouses pension.
“In one case I managed to persuade a woman who was going to settle for the family home - which was worth around £200,000, to consider a pensions splitting order.
“So we managed to go for a pension splitting order with her husband, a mid level civil servant, who had saved over £1mn in his pension during their 20 year plus marriage.”
Pensions advice and information needed
Jeremy Hughes, senior pensions secretary at the Local Government Association and deputy board secretary of the Local Government Pension Scheme Advisory Board, said many pension schemes with divorcing members often struggled to access the right legal and financial advice.
He said in some cases pension schemes struggled to find advisers and solicitors who were able to help advise on pension splitting.
If more widely applied Hughes argued pension splitting could even help close the gender pensions gap.
A Pensions Policy Institute (PPI) report published in February found a woman would need to start saving towards a pension at age three to bring her retirement savings level with a man.
The PPI’s report revealed how by retirement age (67), women had average pension savings of £69,000 compared to £205,000 for men.
How big is the splitting black hole?
FT Adviser asked the Institute and Faculty of Actuaries' Gender Pensions Gap Working Party to estimate how much UK spouses may be missing out on by not opting for a pensions splitting order.
The IFoA assumed an annual salary of £20,000 starting at age 18 and a 3 per cent pay increase each year.
It also used minimum employer contributions of 5 per cent of salary from the employer and 3 per cent from the employee, as well as an estimate of annual investment returns of 6.5 per cent after an allowance for 0.5 per cent fees.
The IFoA then added in the gender pensions gap of 38 per cent - based on data from Legal & General.
The average pension pot saved by a man, based on these calculations would be around £167,000 while a woman’s would be worth 38 per cent lower at around £104,000.
Assuming the assets would be combined and split evenly on divorce would mean half of the difference is not included if pensions are ignored on divorce which would be around £31,500.
