Issue 2
This year’s magic number is 7424. A woman retiring in 2010 will receive this much less than a man on average each year in pounds; this magic number is also known as the pension gap.
The survey, which was done by Prudential (www.pru.co.uk/pdf/presscenter/pension_gap_grows.pdf), found that not only is the gap worth £7,424 but that it has also been increasing over the years; in 2009 it was £6,642 so there is an increase of £782 this year.
Some possible reasons for the disparity are as follows:
- Women need to take career breaks for various reasons, in particular to have children.
- They generally earn less than men.
- And women also live longer than men, so more years after retirement means a lower pension per year.
The report suggests that women can get Home Responsibilities Protection (http://www.direct.gov.uk/en/MoneyTaxAndBenefits/BenefitsTaxCreditsAndOtherSupport/Caringforsomeone/DG_10018691) and also make up National Insurance contributions to avoid receiving less money during their pension years. Moreover, they should consider company pension schemes and even try to save sufficiently by private schemes.
There is a wealth of information available about The Pension Gap. You can simply type it on Google search and you will find a variety of documents that date back for years, implying that the gap has been a problem for a while now. So why then, is it still widening at such a high rate? Maybe a lot of women are not aware of such obstacles until they actually retire -- by which time it is too late.
At this point Asset-Liability Management plays an important role. On a corporate level ALM models can be used to guarantee a pension to the retired members while keeping the contributions low for the active members in case of a defined benefit plan, or by guaranteeing a sufficient level of pension benefit payments in case of a defined contribution scheme. Individuals can also opt for individual ALM models that take into account tax, salary, fixed expenses (i.e. children’s tuition fees), current and possible future real estate and marital status.