European Commission causes Annuity confusion


It has emerged that the European Commission’s ruling on gender pricing in Annuities will not apply to occupational pension schemes.

The European Court of Justice ruled in March last year that insurers could not use gender as a factor when pricing their Annuities.

Annuity rates

The ban is due to come into effect from 21st December 2012 and initially it was thought that insurers would need to change the way in which they price their Annuities. Many experts predicted the ruling would lead to lower Annuity rates, particularly for men. An Annuity rates comparison shows that men currently tend to get a better Annuity rates due to their shorter life expectancy.

However, a European Commission document, released on 22nd December, has confirmed that the ban on using gender to determine the Annuity rate will not apply to occupational pension schemes.

The document says: “Some insurance products, such as annuities, contribute to retirement income. The Directive however only covers insurance and pensions which are private, voluntary and separate from the employment relationship, employment and occupation being explicitly excluded from its scope.”

It continues: “Equal treatment of women and men in relation to occupational pensions is covered by Directive 2006/54/EC of the European Parliament and of the Council of 5 July 2006 on the implementation of the principle of equal opportunities and equal treatment of men and women in matters of employment and occupation (recast).”

Head of pension’s policy at Standard Life, John Lawson, says: “The Test-Achats case only challenged the goods and services directive, which includes personal pensions.

He continued: “An occupational pension scheme is about an employment relationship, and this has not been challenged.

“It is absolutely crystal clear that occupational defined-contribution schemes can differentiate according to sex.”

Money purchase, or defined contribution occupational pension schemes do not provide the guaranteed pensions available from final salary or defined benefit schemes and an Annuity is the most popular option for members to use when converting their pension fund into an income.

Two tier Annuities

The comments by the European Commission have caused confusion amongst financial experts and concerns that it will lead to a two tier Annuity market with potentially better Annuity rates for some members of occupational pension schemes, compared to an owner of a personal pension with the same set of circumstances.

Are you concerned about how the ruling will affect you? Are you close to retirement? Our team of Independent Financial Advisers are experienced in providing advice to those people nearing retirement and are experts in providing an Annuity rates comparison.

Call one of the team today on 0115 933 8433 or email