PwC makes annuity rates prediction
20 December 2012
PwC has claimed the arrival of the EU Gender Directive, which will remove price differences between men and women on insurance products, is going to hurt annuity rates for males.
The directive comes into force tomorrow (December 21st) and according to research by the organisation, male pensioners could see their annuity payouts cut by up to £10,000 following the introduction of the policy across Europe.
Philippe Guijarro, life insurance partner for PwC, explained the change is being made in order to lead to equality in annuity rates between men and women.
"The directive limits the ability of the insurance industry to fairly price the risk being taken on. Men will see their annuity payouts fall and women will see their life insurance premiums rise," he said, noting it is not clear where the directive could lead the sector next.
Raj Mody, head of pensions consulting at PwC, added that a "small amount" of women are going to be better off through their annuities in the wake of the arrival of the directive this week.
However, he highlighted the fact that eight out of ten annuities currently sold in the UK are bought by men, "so many more people risk losing out than gaining".
Mr Mody stated it is more important than ever that individuals considering the purchase of an annuity shop around in order to get the best possible rate on the market.
"The difference between the best and worst annuity rates in the market can easily be around 20 per cent to 30 per cent," he said.
PwC revealed that the £10,000 headline figure is calculated using the Association Of British Insurers' decrease for male annuitants' expectations, as well as price comparison data on 'male annual annuity payments' based on a £100,000 premium size, the 'number of years expected to live' and 'allowance for future investment returns' data from the Office for National Statistics.
Billy Burrows, director of The Retirement Academy, recently told Money Marketing that 2012 was the year annuities became a mainstream option.
Those wishing to find out more about annuities can contact Key Retirement Solutions.