An EU Directive that comes into force on the 21st December 2012 states that the price for financial products cannot differ between men and women. One of the more notable affects of this ruling will be surrounding pension annuities purchased by men. You should be aware that this ruling will not affect those with final salary pension schemes or those with guaranteed annuity rates attached to their pension.
Due to life expectancy averages, life companies have historically priced their pension annuity rates on the fact that an average man’s age at death is lower than that of a woman’s and therefore they have received a higher pension income than a woman of the same age.
It is expected that men’s annuity rates could fall by as much as 20% because of this ruling, and for those that are due to retire shortly this is yet another blow to their pension income which compounds the issue of annuity rates that are already low. Unfortunately the EU cannot guarantee that men’s life expectancy will increase to the same as women’s which may have made this ruling more palatable.
For those that do not want their pension income now it is worth doing some in-depth retirement planning now. It is possible to buy a pension annuity and defer the income by up to 1 year; an income will then be received as an annual payment once per annum. It would also still be possible to take a tax-free lump sum now and it would benefit from receiving a pension rate based on current legislation.
It would be wise for men that are due to retire in the next few months to consider the option of retiring slightly earlier in order to retain the current rates, however, if retirement is not due for several years early retirement is unlikely to be beneficial.
