Annuity Rates

Like life insurance, annuities will be affected by the ruling because they are based on life expectancy, which currently takes gender into account.

Women live longer than men – their life expectancy is 82, compared with 78 for men – which means that women pay higher premiums than men because the pension fund will have to last longer, whereas men’s annuities generally cover a shorter time period.

Action point: Annuities explained - read our in-depth guide for more information on current annuity pricing.

Better annuity rates for women
Once gender is no longer a pricing factor, women will get more for their money and men will get less. The general consensus is that women’s annuity income will rise by 2.5% and that men’s will fall by 2.5%.

Rates could be impacted even more than that. Some organisations, such as the ABI, think rates may change by more than 2.5%. They predict an 8% decrease for men and a 6% increase for women.

Other predictions say rates for men will fall by as much as 10%. Roughly translated, this means that a man with a £100,000 pension pot could be almost £700 a year worse off – and nearly £12,000 worse off over their lifetime.

How to find a better annuity rate
For women, waiting to purchase an annuity until after December 21 is the best idea, as they will almost certainly get an uplift on their annual income once the ruling's in place. As you get older annuity rates increase, so holding onto purchase an annuity may be a better option.

There is also the option of taking out an alternative to an annuity, such as income drawdown. Income drawdown allows people to take an income from their pension savings while leaving them invested in the stock market.

The future of annuity rates
Rates may rise slowly as annuity providers and insurance companies watch and wait to see what their competitors do, so any rate increases or decreases may not be felt for some time.

It's hoped that, in time, the annuity industry will develop more sophisticated assessment methods, which may balance out the negative impact of the gender ruling on consumers.

One thing worth remembering is that those people who take out enhanced annuities won't be as badly affected. This is because enhanced annuities take a broader range of factors (such as postcode and health) into consideration.

Whatever the outcome, you should always shop around when looking to buy an annuity. If you don't, you could end up with a bog-standard, homogenised annuity that doesn’t suit your needs and is poor value for money.