Are ‘Unisex’ Annuity Rates on their way?

The world of retirement planning seems to in a state of transition at the moment with the proposed changes of the coalition government to end the need to purchase an annuity, whilst also introducing an uplift in the death duty on vested pensions from the current level of 35% to an increased level of 55%, such as Income Drawdown plans. I have covered this in greater depth in a previous blog earlier in late January 2011 (called Income Drawdown Policy Review and Proposed Rule Changes on Annuitisation).

European law may now also have an effect of the income available from future retirement funds with the possible introduction of unisex annuity rates from early March 2011. Along with other gender based products based on the sex of the applicant, such as many insurance based products, a ruling from the European Court on 01 March 2011 may see the terms of future contracts change, with varying results dependent on whether you are male or female. My understanding is that their ruling will be based on the argument that the current gender based regime is discriminatory because there is overlap between men and women in the ages to which most people die. Obviously, there are opposing views to this argument and its subsequent studies and the European Court will rule accordingly on 01 March 2011.

This is a multi-billion pound market in the UK each year and many insurance companies and annuity providers are already gearing up for this potential change and the unisex annuity rates from many may change quickly, if not immediately, to meet the new requirements. This may well have an effect on your pension income planning if you are looking at drawing your benefits in 2011. Your Independent Financial Adviser (IFA) should be able to guide you with your individual planning.

As a general suggestion, if this legislation is approved, male annuity rates are likely to fall (some suggest up to 5%) and female annuity rates may rise by approximately 3%. Joint life annuity rates may see a fall of around 1%, as approximate examples, although we will wait to see how providers react. This may see the prevalence of more research by investors into the retirement options available for their pension benefits, such as the use of the Open Market Option (OMO). I have detailed retirement options further on our website here, Retirement Options.

Retirement planning is a complex subject and this article should not be treated as individual advice. Individual advice is only available based on your individual circumstances. Further information, advice and contact details are available at our websites, www.churchouse.com or www.planmypension.co.uk

Keith Churchouse

Director of Churchouse Financial Planning Limited

Churchouse Financial Planning Limited is authorised and regulated by the Financial Services Authority. www.planmypension.co.uk is a trading name/style of Churchouse Financial Planning Limited.