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Concerns raised over ‘rush’ to buy gender-specific annuities

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Pension experts have raised concerns that male investors have rushed to buy annuities before gender-neutral pricing is introduced, despite little evidence the new pricing will lead to a significant slump in rates.

In March 2011 the European Court of Justice ruled that insurers cannot price products based on gender. All insurers must scrap gender-specific pricing by 21 December 2012.

Following the ECJ announcement, providers and trade bodies issued a series of predictions about the impact the decision will have on annuity rates. The Association of British Insurers said male rates could fall by 8 per cent and female rates could increase by 6 per cent.

A number of providers are already offering gender-neutral annuities. Analysis of the rates offered by Aviva, conducted by Better Retirement Group, suggests the impact of gender equalisation has been relatively small.

Aviva table

For a 65-year-old with a £100,000 pension pot, the best available quote for a gender-neutral single-life annuity is £5,784.84.

This is just 0.86 per cent lower than the gender-specific male rate of £5,835 and 1.93 per cent higher than the gender-specific female rate of £5,675.16.

For a couple where the man is aged 65 and the woman aged 60, the gender-neutral joint-life annuity rate of £4,975 is 1.62 per cent higher than the gender-specific rate of £4,895.76.

Better Retirement Group director Billy Burrows says: “I am seriously worried that a lot of people will have been persuaded to buy an annuity based on getting a gender-specific rate. They may regret that, especially if insurance companies decide to increase rates next year.”

Annuity Direct chairman Alan Higham says: “I think Billy is absolutely right. There has been a rush to annuitise ahead of 21 December and a lot of these people are doing it for the wrong reasons.

“For some people buying an annuity is not the right decision and we have turned away a lot of business because of this.

“People should not be panicked into buying an annuity but that is what has happened.”

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  1. What about people that have been waiting 17 years for annuity rates to increase?

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