Pensions and the Sex-Factor

The decision of the European Court of Justice last week which has determined that using sex as a factor in assessing insurance premium levels will no longer be allowed provided plenty of newspaper coverage last week, much of which focused on increased motor insurance premiums for women into the future.

For pension purposes however, the news may be slightly better, assuming that the ‘discrimination’ applied in the purchase of annuities has traditionally favoured men. While on the motor insurance front, it is clearly being assumed that while the cost of insurance for women will definitely rise, the cost of insurance for men may not fall to meet it in the middle. Applying this presumption to the pension market would mean making pensions significantly more expensive for men.

Given that pension coverage for men is much greater than for women, this may seem unlikely, as the impact on such a large proportion of the market would, not only result in a fall in business, but would result in lower incomes come retirement age. While many questions were asked last week about whether increased premiums would result in fewer women drivers, it’s far more likely that to increase the costs of making pension provision will have the immediately knock-on effect of reducing the numbers applying for it.

Would a drop in the costs encourage more women to take command of their own pension provisions? Today, for a woman aged 60 to purchase an annuity to provide an income of €30,000 will cost approximately €670,000. The equivalent cost for a man would be approximately €645,000.

So we can look at this ECJ decision in a positive light, while it may cost a 40 year old woman more per year to insure her car, the reduced cost of providing for retirement may far outweigh this.

Sonia McEntee