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HMRC tells providers to increase drawdown rates for women

Treasury 480

HM Revenue & Customs has told pension 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.

In a statement issued yesterday, HMRC says: “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.

“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.”

MGM Advantage pensions technical director Andrew Tully says the decision means a 60 year old woman will be able to take around 4 per cent more income through drawdown, while a 75 year old woman will see their maximum income increase by around 8 per cent.

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  1. More GAD rReviews? 15th August 2012 at 10:45 am

    How will this be done? Will a new GAD review have to be undertaken on the 21st of December for all females currently in drawdown, and thus start a new 3 year reference period?

    What if my client(s) commenced drawdown before April 2011 & is currently on 120% of GAD and their review date isn’t until 2014/15 – Will they be able to take 120% of GAD @ the Male rate? (I suspect not) Would the review be compulsory even if it was detrimental to the client?

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