The new gender directive and your pension fund
Recently, a huge development in the way annuities are calculated took place, which will have a massive effect on pension funds of both men and women. Until recently, men enjoyed higher annuity rates than women, but a ruling from the powers has seen the pension income for women go up, while the pension income for men will likely suffer so to make the annuity rates non-discriminatory. The underlying notion is that it there should be no difference in the annuity rates given to men and women and how it is calculated, despite the fact that women on average outlive their husbands.
One of the main reasons for this change is that women, on average, have greater life expectancies than men, with the UK average age being 82 compared to just 78 for men. Greater lifespan means that women are often having to pay more into their pension funds or receive less if they pay the same amount as men from their annuity each year after they retire. The change is expected to come into effect by 21st December 2012.
These changes should be a concern to anyone who currently has an annuity, as well as those who are considering purchasing one. It’s predicted that the average annuity rate for women will rise by 2.5%, while the rate for men is likely to fall by a similar percentage. However, some believe that a more dramatic rise for women and fall for male annuity holders could be the case, making it harder to make ends meet for those who want to provide for their future after they decide to leave the workforce for good.
If you are a man and you intend on getting a more favourable annuity rate, then the best clue for the year sit down an evaluate objective comparison sites such as my pension expert and to decide which company will in fact help you boost your annuity rate. In securing a rate as it stands today, it will mean that, in the face of dropping annuity rates, the return from your plan will look a lot better when compared to what an annuity purchased in 2013 would.
As for women looking to purchase an annuity plan, the time to buy would be after the change takes place. This means that they would be able to take advantage of higher rates, which could rise by as much as 8% if some experts are to be relied upon.
The gender directive is a giant leap for women, who will no longer be “penalised” for living longer than their male counterparts. Even though men are set to lose out on the retirement income advantage that they have enjoyed for decades, there is still a reasonable amount of time left on their hands to secure this valuable benefit, especially since we will all ultimately retire one day. At least this way, you can stay one step ahead and enjoy a greater financial health in the future.