Dr Oonagh McDonald, director of the Retirement Income Reform Campaign, has issued a call to say that basing annuity rates on gender and giving men larger pensions than the equivalent women is not accurate and should be changed.
She sighted that there are many things that affect life expectancy and therefore the annuity rate, not just gender - it should take into account health and wealth.
Our view
To explain the jargon, when you reach retirement, you will have normally built up a pension fund. This pension fund is then invested in an annuity to give you an income for the rest of your life.
In simple terms, if both a male and female 65 year old have the same fund, the male will generally obtain a higher starting income because they are not expected to live as long i.e. the woman is likely to get more because she will live longer and get her income for many more months, on average 3 or 4 years.
We believe that whilst the system is by no means perfect, it is not equitable to force providers to offer sex equality rates and offering rates based on other income (the theory being the wealthier you are the longer you will live) - can only affect the poor by making them poorer.
The facts are
1. Women do live longer than men.
2. If a woman or man does not have a good life expectancy then there are "impaired life annuity" rates to offer higher incomes to the less healthy.
3. There are even "post code annuities" where if you live in the North or Scotland, you will tend to be offered higher incomes because your diet is supposed to be generally poorer.
4. Offering "income" related rates will only make the poor worse off and create a greater state burden.
To give a fairer annuity rate, it should be looked at as having let's say 4 rating criteria as standard and ignore point e. i.e. postcode addresses:
Learn more about annuities and at retirement options in the Pensions Adviser.com.
Free Fact Sheets For Registered Users - At Retirement Your Options and Impaired Life Annuities.