A European Union ban on insurers charging men and women different prices has boosted the income of British female retirees, finance data firm Moneyfacts said.
The ban has lifted payments for women who hold an annuity – an investment policy that pays retirees a regular income until death – by 2.9 per cent, while payments for men have fallen 2.7 per cent, Moneyfacts said on Wednesday.
The changes came as insurers complied with the ban by introducing equal payment rates for men and women, having previously paid women less because they live longer on average.
The EU’s highest court banned insurers’ practice of charging men and women different prices as sex discrimination in March 2011 after Belgium’s consumer association brought a test case against it.
The ruling will likely lead to higher insurance costs overall as insurers probably won’t match price increases with equivalent cuts, analysts have said.
While the ban has delivered a financial boost to female retirees, it is expected to raise car insurance costs for younger women by up to 40 per cent.
Women had previously benefited from lower prices than men because they are statistically less likely to crash.
Annuity income for women still fell 6.1 per cent overall last year as insurers passed on a drop in the returns they make on investments in government bonds, although the decline was lower than the 11.5-per-cent drop absorbed by men, Moneyfacts said.
Some analysts warn annuity rates could fall further if Britain’s official inflation rate drops as a result of proposed changes to way Britain’s Retail Price Index is calculated. A lower inflation rate would cut the value of long-dated index-linked gilts used by insurers to fund annuities payments.
The Office of National Statistics is to produce recommendations on how the rate should be calculated on Thursday.
Britain’s biggest annuity providers are Legal & General, Prudential and Aviva.