Will men end up worse off with annuity gender pricing?
The European Court Of Justice is currently debating a ruling regarding the topic of annuity gender pricing. The predicted outcome is that the European Court of Justice will rule that insurance and pension annuity companies are no longer allowed to use gender as a rule when calculating annuity rates and prices.
The allegation against the current annuity pricing is that the unfair difference in annuity rates between genders actually infringes on human rights and gender equality laws.
Currently, men receive higher rates due to the fact that their life expectancy is less than women.
Annuities are based on calculated risks in terms of life expectancies. Just as a smoker would receive higher rates because the pension company would not expect to pay out for a full life, so do men receive higher rates because of a lowered life expectancy on average.
The European Court of Justice is debating this ruling as it came to light that the current annuity process does not coincide with gender equality laws. Similar regulations have been enforced in areas such as car insurance, where women used to receive better rates because on average they were calculated to have fewer accidents than males. It has now been ruled that women must pay the same premiums as men to comply with the gender rules.
MD of Canada Life John Occleshaw commented, “We think there is a very good chance that the ECJ will rule you cannot use gender to price insurance in annuity business. It is less clear cut if that will be immediate or transitional. We will be ready to price on the 1 March if there is no transition period and will be in a position to offer unisex rates. It would make annuities worse for males as at the moment they more as life expectancy is lower. Female rates would get a bit better. We expect rates to settle in between male and female prices.We are doing our best to make IFAs aware of what is going on. We do not want to guarantee a quote and then the IFA and client cannot get it because of the ruling."
