EUROPE - The European Court of Justice may equalise annuity rates for men and women, but doing so could make women's pension income even worse, experts warn.
The Advocate General to the ECJ said the practice of giving men greater annuity payouts for the same pension pot because they are likely to live shorter lives is wrong.
If the AG's opinion is taken on board by the ECJ, men in the UK could see annuity rates fall into line with women's rates.
The advisory opinion, issued to the ECJ on 30 September, said life expectancy is influenced by many factors other than gender, such as economic and social conditions, family environment, drug use, sport and eating habits.
Mercer regulatory research group head Deborah Cooper said: "Essentially, the position is gender, like race, is beyond the control of the person so the Advocate General considers it inappropriate to use it as a factor to determine the cost of an insurance product.
"But there is a lot of evidence that suggests gender is correlated with risk factors relevant to insurance. The obvious example is mortality, where women on average live longer than men.
"Whilst the Advocate General is correct to say that some of this difference may be due to social or lifestyle factors, insisting that it is ignored entirely could give rise to unintended consequences.
"For example, insurance companies could require stricter underwriting tests, making insurance more expensive for everyone."
Mercer calculates the current level single life annuity available for a woman of 65 with a £50,000 pension fund at around £3,100, whilst it is £3,300 for men. With joint life annuities the gap between male and female rates is lesser.
The opinion is currently being considered by the ECJ, and if ratified, will become a law that must be enforced in all EU member states.
Annuity specialist Burrows & Cummins partner Billy Burrows said: "I understand the need for equality, but with annuities it is not that straightforward as the issue is longevity.
"A lot of women are the beneficiaries of the joint life annuities of their husbands or partners, so if these rates fall it may affect their income anyway; only single women would benefit.
"If passed this law will do the opposite of what it is supposed to. It is another nail in the coffin of annuities."
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