A pension gap, what is it?

A pension gap, what is it?

You often hear that if you add the state pension to the pension from your employer(s) - the amounts are stated on the policies - and the result is below 70% of the salary that you earned before you retired, your income will in fact be too low to live comfortably in the future. Your income will be a lot less by then, whereas your fixed costs will remain the same. That is what is commonly referred to as a pension gap. 

It happens to lots of people, for example, if their salary has increased significantly, if they started working after the age of 25 or if they are divorced. You can fill that gap by saving extra at a bank or through an annuity insurance policy. But there are also other options; for example, if you expect to inherit a considerable sum of money. Or maybe you have a house with a value substantially in excess of the mortgage. Or you own a business that you can probably sell very well; or you are going to live on your boat when you retire or become a 'pensionado' in a less expensive country. 

The question then is: do you really need supplementary insurance to fill the pension gap? It is useful to calculate it (or have it calculated). Incidentally, women are more likely to have a pension gap than men. They do not always realise that working part time (or temporarily stopping work altogether) because of the children, also means that they receive a lower pension.