The ECJ’s decision to ban gender pricing for annuity products will cost a man with a £100,000 pension pot £12,000 over their lifetime, according to A J Bell calculations.
Earlier today the European Court of Justice confirmed that offering annuity prices based on gender will be illegal from December 21, 2012.
A J Bell marketing director Billy Mackay (pictured) says a man with a pension pot of £100,000 can expect to be almost £700 a year worse off and nearly £12,000 worse off over their lifetime.
He says: “This could also have a knock-on effect in the long run on the rates at which men can take income from drawdown as well because they are intended to reflect annuity rates. GAD rates have only just been reviewed. Another review to reflect this ruling is a distinct possibility.”
Intelligent Pensions technical director David Trenner expects the market to deliver more sophisticated underwriting rather than simply ‘levelling-down’ male annuities.
He says: “There seems to be a general expectation that rates will be equalised down, but I don’t believe this will be the case.
“The annuity industry has been given 21 months to consider how to underwrite people buying annuities more effectively and I fully expect a more intuitive and better solution to be delivered by the market.”
The ABI estimates that men will see an eight per cent reduction in annuity rates while rates for women approaching retirement could rise by six per cent.
Dr Ros Altmann says men and women will both be hit by the ruling when it comes to annuities. She says “Currently, men buy around eight out of every ten annuities sold in the UK and all of them risk receiving much lower pensions as a result of this decision.”