Cost Of Pension Equality For Men Is £10,000

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Pension experts are reluctant to calculate just how much men are expected to lose when collecting annuities as the European directive on gender equality came into force – but now they know.

The cost of gender equality is around £10,000 for men – as that’s how much less annuity companies are paying

The EU directive came in to force on December 21, 2012, and imposed a condition that a person’s gender could not become the basis for calculating risk for insurance and other financial products.

The big issue flagged up was that the cost of motor insurance for women, especially the youngest, would rocket.

Now, accountancy firm PricewaterhouseCooper (PwC) has worked out retired men with a pension pot of £100,000 could lose up to £10,000 over the policy term because of the gender ruling.

No benefit

They calculate that the pension pot should pay out £6,500 over a 17-year retirement, but will now only provide £5,900, which equates to the £10,000 loss.

Historically, men have earned around 8% more than women in annuities because their life expectancy is lower than for women.

Philippe Guijarro, a life insurance partner at the firm, said: “The question being asked by consumers and insurers alike is where is this directive going to take the industry?

“Insurers must ignore gender as a way to ensure price equality, but the rules restrict how insurers calculate risk.

“This means that the cost of life insurance and annuities will rise for women while men will annuity values drop.”

PwC say that only a few women will benefit from the rule change since men buy 80% of annuities, which means more will lose than gain.

Women are also losers

Couples where the man buys a joint life annuity will also lose because they will also receive a reduced return.

However, PwC says the directive is a great reason for people to compare annuity rates and not to reject those offered by their pension providers.

The firm says that the difference they’ve found between the best rate being paid and the worst rate is between 20-30%.

The move comes at a time when annuity rates have been falling in recent years due to poor performance on financial markets and rising life expectancy.

Implementation of the new rules is under review by the European Commission, which said: “Insurers are innovative and competitive enough to make adjustments which offer unisex products without unjustifiably raising the price of products.”

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