Unisex annuity rates coming in 2012

by Chris               

Last year we saw the European Court of Justice ruling regarding the legality of gender-based pricing in insurance underwriting. The court ruled that taking into account gender when underwriting insurance products was discriminatory, and therefore should not be permitted under EU law. The ruling impacts on many forms of insurance including pension annuities. After December 21st of 2012, the practice of using gender as a factor when compiling a quote for an annuity will be prohibited under EU law, although many annuity providers are expected to adjust their pricing well before this date.

Prior to this ruling annuity providers have based their annuity quotes on a number of different factors such as age, location, health and of course GENDER.  

On average women live longer than men and as a consequence were offered annuity lower rates.  This is because the providers were calculating that they would have to payout income to women for a longer time period than men (on average).  Now the court has effectively outlawed this practice, rates will have to be equalised.   Although you might expect these new ‘unisex rates’ to rest half way between current male and female rates, it appears that many providers will in fact be offering ‘unisex rates’ just above current female rates.

Ironically many women will in fact be worse of as a consequence of this ruling as 80% of annuities are bought by men to support them and/or their partner.  So the potential fall in male annuity rates is bad news for the majority of families.

We expect the demand for annuities to rise during 2012 as men try to secure better rates before the rules change.  As always we recommend seeking specialist advice before committing to an annuity purchase especially for those looking for a way to secure the best deal in the face of lower rates.

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