• Aegon takes stock of the financial services battle of the sexes
• Could this change if the UK votes to leave the EU?
• Will your gender affect how much your annuity might be worth on the secondary annuity market?
Since December 2012, insurance product including life or critical illness cover, car insurance or an annuity must offer unisex terms – so can’t differentiate between men and women. This applies even if there is statistical evidence of a difference in life expectancy. In practice this means everyone gets terms ‘somewhere in between’ what a man and a woman of the same age would have received had there been no gender ruling. It is still permitted to differentiate based on other factors that affect life expectancy such as health, smoker status and even postcode.
For some products, gender neutral rates work to the benefit of men and for others for women. Before the ruling, women got cheaper life cover and car insurance than their male counterparts. With annuities, it works the other way. In reality, women on average live longer so will receive annuity instalments for longer. So for any given pension fund, they used to receive a lower annual amount, albeit on average paid for longer. When annuities could take into account gender, men received a higher annual annuity income (but for fewer years on average) than a woman of the same age. So in the annuity space, women benefit from the Gender ruling and men lose out.
If the UK votes to leave the EU, the UK Government has a choice to make as to whether to continue the ban on any form of gender discrimination. However, any attempt to revert to differences in treatment for men and women, even where based on hard statistical evidence, is likely to be highly contentious.
Steven Cameron of Aegon says: “When a golf club’s decision to continue to bar female players makes global headlines, it’s clear our society no longer tolerates discrimination on grounds of gender. While that’s hugely positive in most walks of life, it remains a fact that on average women live longer than men. Different life expectancies between men and women mean gender neutral life insurance and annuity rates create winners and losers between the sexes.
“The gender ruling originated in the EU. However, even if the UK voted to leave the EU, it would be highly contentious for any politician to consider reintroducing gender discrimination in any area.”
The secondary annuity market
Next April, there will be a new gender consideration linked to the secondary annuity market. Could a person’s gender affect how much they might be offered if they choose to assign away future annuity instalments? It’s not clear if buyers will be permitted to calculate their offer price allowing for the gender of the annuitant. Any organisation considering buying someone’s future annuity instalments will want to make an accurate assessment of how long the person might live. On their death, the organisation will stop being entitled to future payments. So women who on average live longer, could attract higher offers than men of the same age unless the gender ruling stops this.
Steven Cameron says: “The Government’s intention to allow individuals to sell their annuities on a secondary annuity market from next April will create many new challenges, not least around interpreting the gender ruling. We need urgent clarity on whether or not those buying second hand annuities will be allowed to offer women more than men of the same age.”
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