Income Drawdown And Gender Equalisation
Women have always been given the rough end of the stick when it comes to annuity rates. Stats say that on the whole women tend to live longer than their male counterparts and annuity providers, who use life expectancy as a key variable in calculating their rates, expect to have to pay out for longer and hence offer lower rates.
However this is all about to change when new rules banning the use of gender when annuity providers calculate rates come into force later this year. This change will affect both annuity rates offered to women and also income drawdown policies. HM Revenue and Customs (HMRC) have confirmed that from December the amounts women can drawdown from their pensions under an income drawdown arrangement will now be based on male annuity rates. And as these rates are higher, the level of income will in turn be higher. Income Drawdown has become more common in recent years with annuity rates at very low levels. Income drawdown allows your pension to remain to be invested while you take income from it as a form of drawdown.
This change will be good news for women in drawdown arrangements who have seen their income fall as a result of low annuity rates and the also new government rules which have capped the amount that can be drawdown. The amount you can drawdown has always been set by the Government Actuarial Department (GAD) and is a % of the income you would have received from a standard annuity. In the past this rate had been 120% but a change last year saw this fall to 100% meaning a reduction in pension payment for many policyholders.
So the changes could see a boost income for women but possibly a reduction for men as annuity providers try to equalise the two genders. This gender equality has arisen from The European Court of Justice that ruled that insurers can not differentiate on the basis of gender risk differences. As well as annuity and income drawdown this will also have an effect on car, life and protection insurance where women will see more positive rates than in the past.
Author: Robert Trapnell- Right Retirement
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