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Ruling on gender equality could be 'headache' for schemes

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  • Ruling on gender equality could be 'headache' for schemes

EUROPE - Pension annuity policy is set to change in the wake of a European Court of Justice (ECJ) opinion that insurance companies should not charge men and women different prices for the same product.

Currently, men are offered higher annuity payments, as actuarial calculations have them living shorter lives, despite drawing from funds that are the same size.

A statement released by the ECJ said: "The Advocate General takes the view it is legally inappropriate to link insurance risks to a person's sex."

Mercer argued that if the opinion, formed by the Advocate General - an advisor whose legal opinions are not binding, but often implemented - is ratified, it would result in annuity costs for men rising, while the costs for women would be likely to fall.

Deborah Cooper, head of the consultancy's regulatory research group, said: "Although any changes are unlikely to be retrospective and a transition period has been recommended, this is likely to cause further administrative headaches for pension schemes."

She added: "Essentially, the position is that gender, like race, is beyond the control of the person, so the Advocate General considers it inappropriate to use it as a factor to determine the cost of an insurance product."

However, Cooper said evidence pointed toward a connection between gender and other risk factors that mattered to insurers, such as mortality.

"While the Advocate General is correct to say some of this difference may be due to social or lifestyle factors, insisting it is ignored entirely could give rise to unintended consequences," she said.

Mercer calculated that an annuity bought with £50,000 would currently pay £200 a year more to men than to women.

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