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30 November 2012 last updated
Unisex annuity rates launched by Aviva but benefits to females uncertain

Annuity provider Aviva leads the market by launching it's unisex annuity rates ahead of the EU Gender Directive official date of 21 December 2012 and may not benefit females with higher rates.

Females retiring now and where Aviva have been the highest in the market will benefit will 2% extra annuity income as Unisex rates are introduced, although Aviva annuity rates had reduced prior to this action but males have had a decrease of 2-6%.

Not all providers have changed to gender neutral pricing such as Canada Life and Legal & General so these providers may dominate for male rates until the new terms are applied.

To a certain extent the increase in female annuity rates is false as rates have reduced significantly since April this year and Aviva's rates have fallen from market leading to third or forth in ranking for many ages and fund sizes so females now may find are not the highest even with the increase.

 
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First look at impact for unisex annuity income

The expectation earlier in the year was that females would benefit from higher annuity rates due to the EU Gender Directive but providers have been so aggressive at reducing their rates that any benefit of an increase has been eroded.

In August 15-year gilt yields reached a low of 2.02% and since then have recovered to 2.23%. In general a 21 basis point increase in gilt yields would result in a 2.1% increase in annuity rates.

As an example, in August this year a female aged 55 with a fund of £100,000 could have purchased an pension annuity on a single life, monthly in advance and level basis receiving an income of £4,546 pa. Even though we would have expected an increase in the income this had decreased to £4,323 pa in early November for the highest annuity offered by Legal & General, a fall of £223 pa or 4.9%.

Legal & General have since reduced all their rates including female rates and have dropped out of the highest position to be replaced by Aviva after they increased their female rates offering a unisex annuity and the income is now £4,241 pa, a fall of £305 pa or 6.7% compared to August, even though we would have actually expected an increase of 2.1%.

Significant loss for female annuitants

The difference represents a lifetime loss for the annuitant and gain for the provider. For a female aged 55 the Office of National Statistics (ONS) would expect her to life for 28.8 years so the fall in annuities has resulted in £8,708 less income over her lifetime. We may find annuity rates increase in the first quarter of 2013 if margins are too large and competition returns to the annuity market.

News related stories:
Unisex annuity rates for females the winners and losers
Annuity rates December 2012 unisex annuities introduced
Unisex annuity rates to reduce annuities for males and couples
Impaired annuity providers reduce rates 2% for EU Gender Directive
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