EU ruling could cut male retirement income

Experts warn that from March males could lose the favourable rates they currently get when buying an annuity – where you trade in your pension with an insurance company for a regular income – as a result of EU laws.

The European Court could outlaw the use of gender in determining insurance pricing on 1 March when it rules on the matter (see the Free Annuity Guide).

Insiders expect the court to rule in favour of a ban, to be enforced immediately. However, as the judgement has yet to be made, this is not certain.

Men tend to get higher annuity rates – which translates into a higher income – because they usually live shorter lives than women. Insurers can therefore offer better terms to men because they are likely to pay out for a shorter period.

Tom McPhail, from financial advice firm Hargreaves Lansdown, says: "If you are a man who has made the decision to get an annuity I suggest you get on quick with it."

The difference in possible rate drops is more likely to be pronounced for older men. That's because at age 75, for instance, the difference between men and women's life expectancy is more pronounced than at, say, 55.

A healthy 55-year-old man is expected to live for another 25.7 while a woman of the same age is forecast to live another 28.8 years – 12% longer.

A healthy 75-year-old man is expected to live for another 10.7 years compared to 12.5 years for a woman – 17% longer.

McPhail says male rates are more likely to fall in line with women's rates, if the use of gender is banned, rather than the two meeting half way.

If he is correct, women's retirement income is unlikely to climb substantially.

Any ruling would also affect motor insurance premiums. Men tend to pay more because they are involved in more accidents than women but this could also change, with male premiums set to fall, while women's costs could rise.

Further reading/Key links

Pension help: State Pension Boosting, Free Annuity Guide Best rates: Top Savings, Top Fixed Savings Stay safe: Safe Savings