European Court of Justice ruling on gender and pension costs
The European Court of Justice (ECJ) has ruled that insurance companies will no longer be able to use sex as a factor to determine premiums.
The media has largely focused on the way this will affect car insurance premiums. However, the ruling will also have a significant impact on the way that annuities are calculated. An annuity is the product that most people buy with their pension fund which provides them with an income in retirement. Currently, the calculation of annuities is based on a number of factors including life expectancy. As women, on average, live longer than men, their income from annuities is less than that of men’s as it.
In theory this should be better for women approaching retirement. Research from the Association of British Insurers (ABI) shows that women’s annuity rates could rise by 6% while men’s annuity rates could fall by about 8%. The requirements will come into force on 21 December 2012.
For more information, read our guide on equal pay and pensions.