Gender directive could slash men’s annuity payouts
The EU Gender Directive, which came into force today, could see men losing up to £10,000 from their annuity payouts, according to research by PricewaterhouseCoopers.
Under the new rules insurers are no longer allowed to take gender into account when setting annuity rates and premiums on insurance products.
Men previously enjoyed higher annuity rates than women because their life expectancy is lower, but rates for men and women must now be equalised.
PricewaterhouseCoopers suggests that payouts could be cut by up to £10,000 for men, over the lifetime of their retirement, while women could be better off, although they could lose out when it comes to joint life annuities.
Raj Mody, head of pensions consulting at PwC, said: “While a small number of women will be better off from the ruling, eight out of ten annuities currently sold in the UK are bought by men, so many more people risk losing out than gaining.
“Women who are beneficiaries of joint life annuities purchased by their male partner will also be affected as they will end up with a lower income.”
The changes were announced more than a year ago to give annuity providers and insurers time to prepare and the European Commission will monitor how the new rules are implemented.
In a statement the European Commission said: “The insurance industry is competitive and innovative.
“It should be in a position to make these adjustments and offer attractive unisex products to consumers without unjustified impact on the overall price level.”
Separate research from MGM Advantage suggests that more consumers are shopping around Independent Financial Advisors for annuities, and this will be even more important under the new gender rules.
MGM Advantage found that 4.5 per cent of quotes produced each month are for customers using more than one IFA, compared with 2 per cent at the beginning of the year.
Aston Goodey, distribution and marketing director at MGM Advantage said: “We were very surprised to find even this number of customers effectively window shopping around advisers looking to get the best annuity rate.
“It looks like this might be a growing trend – we know of one customer who approached six different advisers to try and secure the best rate.”