Men approaching retirement face a substantial cut in their pension income if changes to EU law get the green light.
The recent annoucement by the EU Advocate-General, Juliane Kokott, that sex discrimination in insurance pricing should be brought to an end was originally thought to have the biggest impact on car insurance. But now the industry warns that a far greater threat is the possibility that bringing to an end sex discrimination in insurance pricing will hit pension savers.
"Women, on average, live three to four years longer than men and this means that, when it comes to calculating how much annuity income they are paid, men will receive more. If the Advocate-General's proposal is adopted, and we will no longer be able to price annuities according to sex, this could potentially be much more damaging than an adjustment to car insurance premiums," Alasdair Buchanan from the Royal London insurance company said. At present, the UK insurance industry is allowed, in effect, an op-out from the EU's Equal Treatment Directive if it can be shown that different pricing for the sexes is based on "actuarial and statistical evidence". According to Malcolm Tarling from the Association of British Insurers, this makes a major difference to pension payouts. "A 65-year-old man can expect to live another 17 years, compared with another 20 for a woman. The average annual annuity payment on a £100,000 pension fund would be £6,510 for a man and £6,111 for a woman. So currently, for the same lump sum, females will on average receive a lower amount per year, but over more years. Females may gain from unisex pricing. However, this increase would come at the cost of the majority of male annuitants (and their dependents), who would see their annuity income fall to subsidise the higher female benefits," Mr Tarling said.
Disturbingly, for the UK insurance industry in the overwhelming majority of cases, the Advocate-General's opinions lead to a change in EU law. "This has major implications. If it happened, it would lead to a levelling down of annuities so men would lose and women wouldn't gain that much. People need to wake up to the fact that this is a real possibility," Mr Buchanan said. On the flipside, ending discriminatory pricing would mean men could see their life insurance premiums come down, as generally they pay more than women because of shorter life expectancy. The European Court of Justice will rule on the issue next year.