Annuities rates are changing following ban on annuity gender discrimination

If you are a man approaching retirement you should beware of the following information.

Following a ruling by the European Court of Justice, with effect from 21 December 2012, insurers will no longer be able to take gender into account when pricing insurance policies and annuities. A Lifetime Annuity is one of a few types of income you can take from your pension fund. Once set up, it cannot be changed.

Currently, due to life expectancy, Lifetime Annuity rates for men are better than for women. This will change in December when annuity rates will be equalised for new contracts. The impact will be that men will get less annuity income than at present and women will get more.

The judgement applies to ‘insurance and pensions which are private, voluntary and separate from the employment relationship’. This means it will affect anyone who has a Personal Pension, SIPP or Stakeholder, who has yet to draw benefits from their plan. Members of occupational schemes will not be affected – bearing in mind that a Group Personal Pension is NOT classed as an Occupational Scheme in this context.

Currently a £100,000 pension pot will purchase a Lifetime Annuity of approximately £5,663 for a man on a single life basis with a 5 year guarantee and £5,459 for a woman when issued on standard terms, subject to change (source Money Advice Service 9th October 2012).

However, an increasing number of individuals choose not to buy an annuity now, but to draw their pension income direct from their fund; in this instance the maximum rate of withdrawal will reduce for men, and whilst one would like to think that females may see an improvement in terms, this is by no means certain.

Please do not take this as a recommendation of any kind since a lot will depend on your individual circumstances and obviously it is impossible to predict the outlook for annuity rates in the future.

If you have any questions in respect of the above please do not hesitate to contact us.

Stiles & Company Financial Services (Petersfield) Limited is a firm of Independent Financial Advisors dedicated to providing a highly professional service to our clients, spread predominately across Hampshire, Sussex & Surrey.

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