Women who seek to resell annuities bought before the EU gender discrimination will lose out if the secondary market follows the same sex equality rules as the primary market.
Highlighting the complexities of introducing the new rules, Aegon has pointed out a series of challenges for lawmakers that leave different groups of vendors worse off, and potentially place advisers in the position where they will have to advise on a gender-specific basis even though no gender-specific pricing exists.
Aegon says Government clarification is required as to whether the price offered for a second-hand annuity must be generated on a gender-neutral basis, or whether purchasers will be allowed to take gender into account.
The current EU directive says anyone in the UK providing services to the public must not discriminate on grounds of gender. Selling insurance products is deemed to be a service, but it is not yet clear whether surrendering or assigning an annuity falls within this definition.
Further complication exists under the disclosure requirements. Under the secondary annuity market, which takes effect from next April, anyone offering a price will also be required to show alongside it a quote for the cost of buying an equivalent income on the open market. This is likely to be on a gender neutral basis, but if annuities can be sold on a gender specific basis, then the gap between the surrender cost and the repurchase cost will look narrower, and therefore more attractive, to women than for men.
Aegon anticipates further complexity where vendors who bought annuities before the gender discrimination rules came in to force in 2012 look to surrender them in a unisex market. Women who paid more for their annuity because of their extra life expectancy will not be able to benefit from that increased life expectancy if they seek to sell their product on.
The matter is complicated further by the prospect of the UK quitting the EU in the forthcoming referendum. If the UK votes to leave the EU, the UK Government has a choice to make as to whether to continue the ban on any form of gender discrimination in new situations such as the secondary annuity market.
Aegon pension director Steven Cameron says: “Depending on how the market is structured, we could see the gap between the price being offered on the secondary market and the repurchase price being narrower for women, making it more attractive for them. Conversely, women selling annuities bought before December 2012 may feel frustrated they cannot recoup the gender uplift they have already paid for. The reality is that whatever approach the Government adopts there is someone who will feel hard done by.
“The Government’s intention to allow individuals to sell their annuities on a secondary annuity market from next April will create many new challenges, not least around interpreting the gender ruling. We need urgent clarity on whether or not those buying second hand annuities will be allowed to offer women more than men of the same age.”
