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Providers count the annuity cost to men of ECJ ruling

Billy-Mackay.jpg

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.”

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. David Trenner - Intelligent Pensions 1st March 2011 at 3:00 pm

    “If an insurance company does not know whether the person buying the annuity is male or female”

    I am intrigued as to how this could happen. Are we talking transgender??

  2. Julian Stevens 1st March 2011 at 9:51 pm

    If ever there was yet another signal that the shackle of annuity rates needs to be cast off, then this must surely be it. What is needed is a retirement income plan geared to full utilisation of the retiree’s pension fund over the (underwritten) remainder of his/her life (or that of his/her spouse), with an insurance element against longer life than forecast or early fund burn-out. Such plans could well provide a higher level of retirement income with no loss of security. Insurance companies should be lobbying the government hard to allow such plans to be designed and marketed.

  3. Julian, you have just described an Annuity !

  4. Actually i think Julian is referring to a Guaranteed Income Drawdown Plan. These do exist but the market is very limited.
    http://www.pensionsadvisoryservice.org.uk/annuities–income-drawdown/guaranteed-income-drawdown-plans

    List of providers:
    Aegon Scottish Equitable – Income for life
    Alico Wealth Management – Select Portfolio
    Axa Wealth – Secure Advantage
    Hartford Life – Guaranteed Income Retirement Plan (GRIP) (this scheme is now closed to new business)
    Lincoln – i2Live (now part of Sun Life Financial of Canada)
    Living Time – the Living Time Income Plan
    LV= (also known as Liverpool Victoria) – Protected Retirement Plan
    MetLife – Secure Retirement option
    Rockingham Retirement – RITA

  5. Annuity Information 8th March 2012 at 3:10 am

    Interesting post. This is noticeably helpful to the readers. Many thanks for sharing.

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