European judges have decided that Male/Female rates for insurance and pension arrangements are discriminatory, and they will be banned from 21 December 2012. The change will affect life insurance, private medical insurance, pensions, annuities, critical illness cover, and motor insurance.
Life assurance premiums will probably increase for women, and probably decrease for men.
An example of how life assurance the rates could change is described in HM Treasury Consultation document. This example forecasts that a typical monthly premium for a term-life policy of £17 for a female, and £22 for a male would change to the following gender-neutral prices of £20.50 because of this new EU ruling. Therefore, female policyholders would pay £3.50 extra per month, and male policyholders would save £1.50 per month, all else being equal.
Source for policy rates: Institute and Faculty of Actuaries Working Party. Based on a 50 year-old, non-smoker, covering a sum of £150,000 for a term of 10 years.
Pensions and Annuities
Most men and women will see a change in pension and annuity rates at retirement. Men will probably see their pension rate reduced, and women will probably see their rates increase.
An example of how annuity rates could change is described in the same HM Treasury Consultation document. The annuity example shows how a 65 year old male currently receiving an average annuity payout of £6,642 per annum from a pension fund of £100,000 would probably see that reduced to £6,574 (a loss of £68 per annum) following the introduction of gender-neutral annuity rates; a 65 year female annuitant who would currently receive an average annuity payout of £6,243 per annum from a pension fund of £100,000 will probably receive an increase on £331 per annum. Source for annuity rates: Institute and Faculty of Actuaries Working Party. Based on a 65 year-old, purchase price £100,000.
Industry speculation suggests that the new rates could vary by greater amounts than those indicated by HM Treasury. For example, Pension World speculated that a man’s retirement income could reduce by up to 5%, and a woman’s income could increase by nearly 8%.
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