1st March 2011

Annuitas: EU Gender Ruling means lower pensions for men and women

The European Court of Justice has today ruled that insurers cannot price products or services based on gender as this would constitute discrimination.

The verdict, which will take effect from 21 December 2012, will mean that insurers can no longer take gender into consideration as a risk factor when calculating premiums. Men currently benefit from higher annuity rates as they are statistically less likely to live as long as women.

Rob Tinsley, Head of Retirement Strategy, comments:  “This is a very disappointing decision that will undoubtedly lead to more expensive products and poorer value to both men and women.  The judgement completely ignores the fact that taking an individual's gender into account, where relevant to the risk, enables men and women alike to get a more accurate price for their insurance. It is very unlikely that we will see a meeting in the middle for pricing as the cost to the industry for meeting these requirements will be huge.”

The ruling will mean a worsening of annuity rates for men and a lower income for women included within any joint annuity structure. Over time, insurers are likely to move towards individual underwriting wherever possible.

Rob continues: “The importance of shopping around at retirement and using the Open Market Option has now become even more crucial to secure the best rate.”

However, this judgement is more far-reaching than just pensions as it will impact on health insurance, life insurance and even car insurance where young women in particular will lose out greatly.

There will be a period of transition from now until 21st December 2012, although whether this is long enough for the insurance industry as a whole is questionable.

For more information, contact RobertTinsley@origenfs.co.uk

Rob Tinsley
Head of Retirement Strategy
Origen Financial Services and Annuitās

Retirement, Protection, Pensions