G-Day heralds end of gender pricing
The Mayan calendar predicts today (21 December) as the end of the world, many insurers will be hoping the prophecy is false after months of build up to today’s gender directive deadline, which sees new European rules come into force that ban gender-specific pricing on insurance products.
The European Court of Justice announced in March 2011 that gender-based pricing was inconsistent with the basic principles of EU law and that it will not be allowed from 21 December 2012.
Since then, insurers have worked to get their systems ready and process applications ahead of the much hyped G-Day deadline, while F&TRC has produced a matrix to show how ready providers are.
According to Raj Mody, head of pensions consulting at PricewaterhouseCoopers, men will see their annuity pot reduce by up to £10,000.
He 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.
“With annuity rates under even more pressure, it is more vital than ever that people shop around for the best rate and do not simply accept the rate offered by their pension provider.”
According to Ageas, women looking to buy life insurance or life plus critical illness insurance could be especially affected by the new legislation and could see a hike in the prices they have to pay for protection cover. Similarly, men could see a rise in the base cost of income protection insurance once the new pricing comes into effect, the provider has predicted.
Research from software provider Avelo, which claims to process 50 per cent of all annuity quote requests from UK advisers, found since July the age men look to annuitise has spiked from 63 to 65, suggesting they were moving to take advantage of pre-G-day prices.
The age of women and those seeking joint annuities, by contrast has varied enormously both reducing to atypically low rates and, in the case of joint purchase, reaching a high of 65.
Employee benefits and pensions firm Shilling, said the ruling meant the open market option was now more important.
Katie Frost, director of Shilling ,said: “This situation is another example of the ever-changing pensions world. It was a big step for the government to vocally support the use of the OMO and would be unrealistic to expect their message to be changed.
“What adds to the confusion is that some men will still be able to find a better annuity level by using their OMO after the new guidelines are introduced. The message for members should be clear and simple – research your own circumstances, not just what you read, and don’t commit to anything until you know for certain where the best value lies.”