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Women to get double pension boost from gender ruling

Women are set to get a double pension boost from controversial European rules preventing sexual discrimination.


by Michelle McGagh on Aug 10, 2012 at 11:08

Women to get double pension boost from gender ruling

Women are set to get a double pension boost from controversial European rules preventing sexual discrimination.

In March the European Court of Justice ruled that insurance companies would be barred from using gender as a factor when pricing their products. Currently men are given higher quotes when they apply for car insurance because they are seen as riskier drivers. This has been good news for women.

However, the opposite has applied in the past when women reach retirement and want to buy an annuity. (This is the insurance contract an individual buys with their savings that pays them an income during retirement.) Because women tend to live longer than men insurers have offered them lower annuity rates. In other words, they get less income per £1,000 they've saved because the insurers reckon their pots of money will have to last longer.

The gender ruling will change this. Insurers will no longer be able to pay men and women different annuity rates just for being men and women. This should see annuity rates improve a bit for women and worsen for men. This is a blow for men as annuity rates have steadily fallen in the past 10 years and are at an all-time low.

It is not just annuities that are affected either. HM Revenue & Customs (HMRC) has confirmed that women cannot be offered a lower income from pension drawdown products either.

Pension drawdown is an alternative to buying an annuity. Rather than handing over all their money to an insurer, individuals keep their pension pot invested and take an income direct from their savings. However, there are strict limits to how much income can be taken. In fact the amount of income that is permitted is linked to annuity rates set by the Government Actuary’s Department (GAD), which are known as GAD rates.

The GAD rates run parallel with the annuity rates offered by insurers, and there are GAD rates for both men and women as there are with annuities.

HMRC has announced that from 21 December drawdown providers will need to use male GAD rates to calculate the maximum pension a woman in drawdown can take each year.

HMRC said: ‘The change being announced means that from 21 December 2012 women will be able to take a higher drawdown pension income than before. Men will see no change in the maximum drawdown pension they can receive.’

According to insurance company Skandia, this change will boost women’s retirement income by 8%.

Currently, a woman aged 65 with a £100,000 pension pot can take an income of £4,900 a year, but after 21 December she will be able to take £5,300 a year, an increase of 8.2%.

Skandia pension expert Adrian Walker said it was ‘interesting’ that HMRC had told drawdown providers to use the male GAD rates to calculate income. However, he did not expect it to impose these rules on companies offering annuities, and expected annuities to be based on the lower female rates in future, meaning men will lose out.

The gender ruling was based on a challenge by a Belgian consumer group, Test-Achats, after which advocate general Juliane Kokott said using gender to determine insurance prices was discriminatory.

7 comments so far. Why not have your say?


Aug 10, 2012 at 22:39

Err - banning gender "discrimination" in motor insurance means women pay MORE . Hardly "good news".......

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Nigel Harris

Aug 11, 2012 at 08:07

@ AndyAndy the gain in pension benefits for women will be many orders greater than any potential losses in motor insurance premiums. The loss of pension benefits for men will be many orders greater than any potential gain from motor insurance premiums. When men die earlier, the state takes their money and gives it to women.

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Aug 11, 2012 at 08:28

Anyone who thinks this will have no effect on annuity rates is living in Cloudcuckooland.

Insurance companies are having to pay out for longer while investing a smaller pot of money. They are not altruistic. They exist to make money for their shareholders.

So what will they do?

Everyone loses out. This is another nail in the coffin of the annuity. Within ten years nobody will buy an annuity. Everyone will draw down till they die.

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Paul Eden

Aug 11, 2012 at 22:26

An independent body needs to investigate an alternative to annuities because QE has destroyed them as an appropriate instrument by which those retiring get an income for the remainder of their lives.

It could be that gilts should no longer be bought at all by pension funds because they respond erratically to political and financial manipulations of governments.

The disciples of political correctness in Europe choose to ignore the disparity in life expectancy between men and women and are quite happy to take from men and give to women. They call this EQUALITY!!

Coming out of Europe is ultimately the only possible answer to the insanity of this political correctness...a move that makes commonsense for many other reasons, not the least of which is that most people in Britain want us to come out.

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Aug 12, 2012 at 23:35

What is the point of electing a UK government just for a foreign outfit to overrule us with crackpot politically correct impositions such as this.

A poll on Thursday by The Peoples Pledge organisation in two Manchester constituences showed nearly 90% of constituents in favour of a referendum on whether we should leave the EU. It is obvious what the outcome of such a national referendum would be; withdrawal.Roll on that day!

Better off out

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Richard S

Aug 13, 2012 at 12:44

As a man will I be able to claim sex discrimination on the grounds that my expected annuity return, calculated as life expectancy x annual payouts, will be less than a woman of similar age and health profile? Or is it that only women can be discriminated against?

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Huw Sayer

Aug 15, 2012 at 14:16

Presumably insurance companies (if they wanted to) could get round this by simply asking proxy questions? For instance, people (women) who give birth to healthy children tend to live longer than those (mainly men but also some women) who don't. So ask about their success in pregnancy - those with healthy off-spring get offered lower rates. Takes account of life expectancy but is not absolutely sex specific (since women who don't give birth and don't breastfeed apparently tend to live slightly shorter lives than those who do).

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