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Dance of ages

Wide disparities between men and women remain in financial services, particularly on pensions and annuities.

The FSA&#39s recent report, Women and personal finance: the reality of the gender gap, showed that only 22 per cent of women have pensions compared with 40 per cent of men.

While the report found that men and women in similar positions had similar levels of financial product ownership, when it comes to self-provision for retirement there are signifi-cant differences.

The difference escalates with age, resulting in “increasing numbers of women who will need to rely on state provision in old age”.

Fiona Price & Partners director Donna Bradshaw says: “With more limited resources, women simply are not able to afford pensions as much as men.”

Some 30 years after the Equal Pay Act, the average earnings&#39 gap between men and women has narrowed from 31 per cent to 18per cent.However, The Equal Opportunities Commission says the differential is particularly marked in the banking, insurance and pensions sectors, with the average hourly wage for women standing at £10.42 compared to £18.03 for men.

One area where there is clear differential between men and women is on annuity rates. As women live an average of five years longer, female annuitants are rewarded with annual rates that are around 10 per cent lower than men&#39s.

Annuity Bureau head of marketing Dave Marlow does not believe women are discriminated against by annuity providers. Professional Brief-ing managing director Keith Popplewell agrees, saying: “Lower female annuity rates are merely a social and actuarial fact.”

But EOC spokeswoman Catherine Evans says the commission has been calling for a change in law since 1998. She says: “The system should not be biased – both sexes should be treated equally. It is up to the industry how they do this. What is happening now is contrary to the spirit of anti-discrimination legislation.”

Dr Oonagh McDonald, director of the Retirement Income Reform Campaign, has long been arguing against compulsory annuity purchase.

In a letter to the EOC, McDonald wrote that stakeholder pensions will discriminate against women.

Whereas annuities were formally the preserve of the wealthy, now large numbers of women will be forced “to sink their pension savings into a product guaranteed to provide them with a smaller income each year than men”, she said.

The letter says: “The Government could have adopted unisex annuities for stakeholder pensions.” Pointing out that equal occupational and state pension rights “were hard fought and won”, McDonald criticises the Government for missing a golden opportunity to address the issue of “gender bias in annuities”.

Where unisex annuity rates have been introduced, some argue that providers have merely defaulted to the lower rate.

Popplewell says: “New Zealand has unisex annuity rates by law. Their annuity rates compare generally with ours but the unisex rate is based on what women&#39s rates would be. Women are no better off but men are worse off.”

Marlow does not believe equal rates are necessarily fairer. He is concerned that the end of the differential could spell the end of impaired life annuities.

Popplewell goes so far as to suggest that women actually are the net beneficiaries once the total paid out rather than annual income is taken into account.

Standard Life general manager of marketing and Faculty and Institute of Actuaries spokesman John Hylands supports this view. He says, over the average life expectancy, women will get more money, especially in later years, but that this is inherent to the way that annuities work.

He says: “Providers will respond to what society wants but one has to understand that any legislative changes could result in behavioural change. Annuities could become less attractive to men and so the rates would effectively be women&#39s rates.”

Unisex rates involve a considerable element of crosssubsidy. While this is mentioned critically by opponents of unisex rates, this is not a notion foreign to British financial products. Most notably, with-profits offers, or at least is meant to offer, an inter-generational subsidy.

If unisex annuity rates were made compulsory, or if the exemption from sex discrimination legislation was lifted, then some argue that equality should be implemented across the board.

Many point out that lower annuity rates for women are simply the other side of the coin that offers women lower car and life insurance rates.

But Bradshaw points out one important difference. She says: “While not everyone needs, for instance, life insurance, purchasing an annuity is compulsory.”

She adds that women are more likely to purchase an annuity straight away as their smaller funds do not tend to give the same scope for income drawdown as men.

Popplewell does not believe women are discriminated against. He says, given recent case law, previous inequalities faced by divorced women and part-time workers have been resolved.

He does, however, qualify this by pointing out the number of part-time workers, predominantly women, who are not aware of the change in law to allow retrospective pension entitlement.

“The pension providers are relying on their ignor-ance. They are not forced to draw attention proactively to the equal benefits that part-timers are entitled to,” says Popplewell.

The FSA report found that women prefer face-to-face advice and are less likely than men to buy financial products through remote distribution. Bradshaw agrees with the findings, saying women are less confident when it comes to personal finance and there is a belief among some married women that it is the man&#39s duty.

She is also critical of way that financial products are marketed. “It is not particularly female-friendly. Women respond to personal and lifestyle rather than figures.”

IFA Promotion chief executive David Elms says: “We could not make it easier for people to see a female IFA. Of the 9,268 addresses we hold on file, 1,163 have a female IFA.”

Popplewell says: “The fact that women are more likely to see an IFA is to be welcomed and means, if anything, that the women will be ahead of the blokes.”

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