Cost of buying an annuity may increase for males from 21 December 2012
Gender (whether you are male or female) has always been one factor used in assessing risk for retirement income products such as annuities and income drawdown. For example, men have typically benefitted from higher annuity rates because they are expected to live for a shorter period of time than women.
An annuity converts your pension into an income in retirement. Income drawdown products allow people to withdraw money from their pension pot until they wish to convert it into an annuity.
This will all change as a ruling from the European Court of Justice means that from 21 December 2012, insurers can no longer consider a person's gender when calculating benefits.
It is possible that this will result in males getting a lower income from their pension pot after 21 December 2012.
However, the Association of British Insurers (ABI) has pointed out that there is a lack of clarity on how the ruling affects annuities for members of occupational pension schemes, as these are covered by a different EU directive. It may be possible to sell gender-specific annuities to members of occupational pension schemes, but there is ambiguity about what is allowed.
Deciding when to retire is a very important decision, and the gender ruling reinforces the need to consider all your options at retirement and shop around for a product that meets your needs. It is thought that a modest change in annuity rates is the most likely outcome, although there is no way of knowing whether this viewpoint is correct.
If you would like to know more about this issue, click here to read the ABI's guidance notes.
If you would like to learn more about retirement options, click here.