A set of new annuity rules are set to take effect from 21 December 2012, which may have a varied impact on men and women who are considering purchasing them both before and after the reform takes place. The rules in question concern gender equality for male and female annuitants and people over the age of 55 who haven’t yet planned for their retirement. Male annuity rates were previously much higher than those given to female retirees, but male rates are to fall while female rates are due to rise slightly in a step towards gender neutrality.
Prior to the changes, which have been enforced by the European Union gender directive, men typically received around 4% more from their annual annuity payments than women as their life expectancy is considerably lower. This change, which has come in the face of annuity rates that have fallen gradually over recent years, is seen as bad news for a lot of people who want to purchase an annuity after the 21st of Dec. Gender alone will no longer determine rates, meaning that other factors such as health and work will have a bigger say in calculating the rate you receive.
According to pension advisors, Mypensionexpert, men should decide to act now if they want to secure a more favourable rate, especially when considering retirement income providers such as MGM are unable to offer the 45 days rate guarantee until after the 21st of Dec. The only way to receive a guaranteed rate based on the current format rests on people taking steps to get a guaranteed quote by 20th Dec. Despite this time pressure, it is yet important to shop around the open market for the best possible annuity provider, when considering that it is a lifetime decision.
As for women, they are being advised to wait until after the deadline to actually receive the intended benefit of the reform. The reason for this is that, after the EU directive becomes law, annuity rates for women are to rise, which will mean a better return form their savings. However, rates are only expected to go up by around 1%, and the recent trend of falling rates could be set to continue, not least because of the number of people reaching retirement age is consistently rising.
There are a number of options available for anyone looking to purchase an annuity or an enhanced Annuity. One such option is a single or joint life annuity. This is the simplest form of annuity available as it pays out for the rest of you and your spouse’s life, even if one of you were to pass away. Level annuities pay a fixed amount each year, while escalating annuities pay a rising amount each year in line with inflation rates.
You can get guaranteed annuities that pay out to your estate or spouse for five or ten years after you die, investment-linked annuities pay out more if you have successful financial investments, while enhanced annuities pay out more if you have underlying health problems that will shorten your life. The best option in terms of getting the most income is to purchase a simple annuity, which is a single, level or joint life one. They tend to pay out more than other forms of annuity, and are seen as less risky.