In a move that could have far reaching implications for the Annuity market the government have confirmed that the EU Gender Directive will not apply to Annuities bought from the proceeds of Money Purchase Occupational Pension Schemes.
EU Gender Directive
The EU Gender Directive, which is due to come into force in December of this year, will mean that insurers will no longer be able to discriminate between men and women when setting their prices.
As men generally have a shorter life expectancy than women, they have until now enjoyed better Annuity rates; using a pension calculator shows just how much better male Annuity rates are compared to those for women.
However, once the EU Gender Directive comes into force the same Annuity rates will be applied for both men and women, most experts believe that this will reduce incomes for male retirees after December 2012.
Annuities bought from Occupational Pension Schemes
However, the Gender Directive does not apply to Annuities bought from Money Purchase Occupational Pension Schemes and the government have now confirmed that they will not extend the implementation of the directive to such schemes, leading to fears that we could see a two tier Annuity market.
Responding to a European Commission statement the government said: “We acknowledge the concerns of those who believe that the judgment will result in a two tiered annuity market and that such a market will be detrimental to consumers and industry.”
“On this issue, whilst we remain concerned about negative impacts of the judgment we do not feel there is sufficient evidence at this stage to justify extension of the requirement to provide gender-neutral pricing of annuities to work-based pension arrangements as well as personal pensions.”
Two tier Annuity market
The news has been greeted with dismay by retirement experts concerned that men who have saved for their retirement into Personal Pensions or SIPPs (Self Invested Personal Pensions) will, unfairly, get a lower Annuity rate than members of Money Purchase Occupational Pension Schemes.
Amongst those people who could be hardest hit are the self employed and workers who had no work place pension to join. Both groups have been forced to use Personal Pension Plans or SIPPs to save for their retirement and are now faced with the possibility of lower Annuity rates than members of work place pensions.