The IFoA rounded this to £30,000 per divorce.
The cost of not splitting a pension
A spokesperson for the IFoA Gender Gap Pensions Gap Working Party said: “Our estimated figure could be very different in practice as pension pots may not be split 50/50, for example due to approximate allowance when dividing other assets.
“If someone has been divorced previously their pension may already be reduced. We have assumed no prior entitlement or division of an individual’s accrued pension for our calculations.”
There were around 120,000 divorces in the UK in 2022 - including England, Wales, Northern Ireland and Scotland - a figure the IFoA said was increasing among those aged 65 and above.
The IFoA estimated 60 per cent of divorces did not involve pension splitting, meaning around £1.8bn a year was going under the radar.
A study by the University of Bristol and the Nuffield Foundation also found more than a third of divorcees did not know how much their pension savings, or their partner’s pension savings were worth.
Scottish Widows also provided an estimate for FT Adviser, which came in at around £4bn.
The pension provider estimated that women who divorced later in their working life could miss out by £77,000 in their pension pot at retirement.
So this meant that each year divorcing women could collectively be missing out by up to £4.5bn in their pension pots at retirement.
Samantha Gould, head of campaigns at Now: Pensions, which also worked alongside the IFoA, said: “Pensions are often the second most valuable asset after a home, but we see that property is often the greater focus during the divorce process which leaves divorcee’s asset-rich but cash-poor.”
“Making sure that pension funds are considered by default in divorce settlements is a vital step to addressing pension inequality. Women are particularly disadvantaged when going through a divorce if pensions are forgotten, because their average savings are generally much smaller than men’s.
How to help clients understand pensions and divorce
Lucy Chahil, a financial planner who specialises in helping clients going through a divorce, said: “Getting in front of clients who are going through a divorce and getting them to talk about their or their ex-spouse’s pension is probably the biggest challenge for an adviser.
“Thankfully financial advice around divorce is becoming a specialised field. An adviser who hasn’t much experience of pension splitting is best off either making themselves aware of the practicalities around it, by using free resources.
“Or they can connect with advisers such as myself, or even network with divorce coaches and therapists who can introduce them to clients who need their help.”
