Gender Difference in Retirement Income and Pension Policy - Simulating the Effects of Various DB and DC Schemes

Abstract

This analysis evaluates the relative pension positions of men and women, under different characterisations of their respective working lives and pension designs. Both Defined Benefit (DB) and Defined Contribution (DC) schemes are considered, as well as a few variants of their basic pension formula, each exemplifying a stylised normative framework.Not surprisingly, the working career is the most relevant factor in determining the relative retirement income of women with respect to men; pension systems can compensate, but only up to a point. As for a comparison between DB and DC systems, taken without explicit redistributive measures, the latter can fare better than the former in providing a more equal distribution of retirement income between men and women, because it removes the greater return to steeper earnings profiles, more characteristic of men. The introduction of a minimum pension provision in the DB system improves the relative position of women with discontinuous or poor careers, while, in DC systems, a formal recognition of women’s care activities through pension credits seems less effective than neutralising their longer life expectancy in the determination of the pension benefits using unisex longevity tables.