Purpose – In the UK, there is a strong government commitment to the compulsory use of annuities to manage the “decumulation” of assets in defined contribution pension schemes. Almost all annuity rates are determined by reference to the gender of the individual involved. This has the implication that females receive a lower pension for a given size of pension fund. It is arguable that this situation represents a clear case of sex discrimination and moral, legal- and policy-based arguments can be made for and against this view. The purpose of this paper is to review these arguments in the light of emerging evidence about longevity. Design/methodology/approach – The paper outlines the nature of the UK annuity market and the associated methods of annuity pricing, details the difficulties of predicting longevity and discusses the economic implications of a move to unisex annuity rates. Findings – A number of recent trends are weakening the financial and statistical arguments against introducing unisex annuity rates. The life expectancy of males and females is converging, the use of annuity pricing factors other than gender is increasingly common and it has become clear that there is great uncertainty in mortality projections. Practical implications – Statistical and financial arguments that gender should be a primary factor for costing annuities should be accorded less weight than in the past. Originality/value – The paper offers an evaluation of the merits of unisex annuity rates in the light of recent evidence about longevity.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.