Pension experts have backed HM Revenue & Custom’s decision to increase the maximum income women can take in drawdown, claiming it will increase their income by 8 per cent.
Last week, the Revenue told providers to offer women the same, higher maximum drawdown rate as men from 21 December. The announcement means providers will need to use male GAD rates to calculate the maximum pension a woman in drawdown can take each year.
This follows a ruling by the European Court of Justice in March last year banning providers from using gender as a risk factor when offering insurance products.
The ruling, based on a challenge by Belgian consumer group Test-Achats, followed advocate general Juliane Kokott’s view that using gender as a risk factor when pricing insurance is discriminatory.
The decision will affect the way insurers price annuities, life insurance, income protection and critical-illness cover.
HMRC said: “Until it becomes clearer how annuity providers will apply the judgement in practice, the maximum drawdown pension for both men and women aged 23 and over should be calculated using the higher male rates from 21 December 2012.”
MGM Advantage pensions technical director Andrew Tully says the decision means a 75-year-old woman’s maximum income will increase by around 8 per cent.
He says: “Increasing the drawdown rates for women is a sensible, pragmatic solution by HMRC.”
Syndaxi Chartered Financial Planners managing director Robert Reid says: “This seems the most sensible way forward for HMRC. All the recent research suggests the difference between the life expectancy of men and women is shrinking.”