4th February 2011

Annuitas: Is there more EU disruption on the horizon?

Back in  September last year Dr Juliane Kokott, an advocate general in the European Court of Justice (ECJ) stated that in her opinion sex discrimination in underwriting insurance policies is incompatible with the Charter of Fundamental Rights and therefore illegal under EU law. If this opinion is accepted by European Court of Justice one of the effects of this is will be to equalise annuity rates for men and women. This decision could come as early as March 2011 and would have a major impact on how annuities are priced.

So how does this affect annuity rates?

Annuities are priced  with reference to different life expectancy tables for both men and women but this may be about to end and actuaries will not be able to allow for the fact that on average women live longer than men.

Rather than actually benefit women, we are likely to see most people worse off in the future due to a number of reasons. These include

• Annuity rates for men will be reduced as rates will be equalised towards the rates for women
• Women who are beneficiaries under joint life annuities will have less income as these rates will also be reduced.
• Some providers estimate that the cost of introducing gender equal annuities will reduce income by as much as 5%

I fully accept the need for equality in principle, but annuities are different and there is no argument with the fact that women will generally live longer than men. Not even the EU can change that!

If this directive becomes a reality the likely outcome is a further drive by product providers to create new innovative solutions, more individual pricing and less attractive conventional annuity options. This in turn brings further complexity to a market where the delivery of affordable advice is already a real challenge.

However at Annuitas we believe we can continue to meet this challenge and deliver both first class solutions to consumers and a complimentary support service to IFA’s

Retirement, Pensions