The EU Gender Directive may not have previously operated within the mainstream consciousness of the British public, but on 21 December 2012 everything changed. Now it is absolutely unavoidable for people approaching retirement age in the United Kingdom to pass by the directive, while it also reaches far beyond annuities. People of all ages will feel the changes to their retirement income enforced by the directive – some will feel the financial benefit, while others will not be so lucky.
The directive recently came into effect in the United Kingdom and eliminated the use of gender as a determining factor for insurance companies to consider when issuing their annuity policies. Although the directive does not work retroactively, meaning that those already with annuity policies will have their retirement income unaffected, it does mean that everyone who takes out an annuity in the future will see their rates fluctuate in a certain direction away from previous rates, dependent on their gender. While men had previously enjoyed higher annuity rates than women due to their shorter average lifespan, the new ruling mean that on average males will see a drop in their post-career earnings while females look set to receive more.
In the Mortality in England and Wales dossier released by the Office For National Statistics on 17 December 2012, the most common age of death for men in those countries was claimed to be 85, while women lived slightly longer, to 89. With the average lifespan increasing by 10 years for men and eight years for women over the last 50 years.
The estimates as to how much annuity rates will rise and fall for both genders is still seeing much speculation, with suggestions that male rates could fall as much as 13 percent. The entire annuity market looks set for a complete reshape in the near future as a result of these changes, with the equalizing point in the future.
This change in policy has forced insurance companies to delve further into personal circumstance than before, with considerations such as previous work history and medical conditions. As well as annuity rates, the EU Gender Directive means that all manner of other policies are now affected, with motor insurance one of the policies which looks set to see the most change. Female drivers under 21 were eligible for significantly cheaper than male drivers of the same age, with some set to see insurance costs rise by up to 40 percent.
The effects of G-Day – the day when the EU Gender Directive came into effect – look set to have long lasting effects on future annuity sales, as PwC North claim that eight out of 10 annuities in the United Kingdom are bought by men. Joint annuity policies between couples could see sharp falls, although this is dependent on the relative age of each partner.
As with all insurance policies, it is extremely important to shop around for the best deal possible, with the G-Day effects ensuring that this is more important than ever for customers to get the best rates. With gender now eliminated as a deciding factor in annuity rates, much more emphasis will now be placed on aspects such as physical well-being and health. While some will obviously benefit from this, men in poor health who are approaching retirement age in particular look set to be receive significantly lower incomes as a result.
About the author:
John Murphy is a keen financial observer, John suggests significant research time be invested into searching for the best annuity rates possible as a result of the EU Gender Directive policy enforcements.