Pensions World

As people begin to retire in their millions with DC pensions, is the battle of the sexes a mere sideshow? asks editor Stephanie Hawthorne

The battle of the sexes rages on. Young female drivers suffer punitive insurance rates despite their generally safer records, while their grandmothers receive higher pensions despite living longer as the result of the European Court of Justice unisex insurance pricing ruling on 1 March. It has found few fans – political correctness gone mad is the overriding verdict.
I disagree.

We cannot look back. While 8 out of 10 annuitants are men, that is the past. More women are amassing pension pots in their own right and, with the advent of auto-enrolment and Nest, pensions saving will be universal across the workplace. Indeed the female employment rate is 65.3% up from 52.6% in 1971.

It is ridiculous that a man and a woman with the same pay and same DC pension should have a different retirement income solely by virtue of their sex. In the workplace equal pay has been the law since 1970s (although according to the Office for National Statistics (ONS) the median hourly rate of a female worker is £11.68 compared with £13.01 for men) – a gender pay gap of 10.2%.

ONS statistics show that 46.3% of all in employment are women – are we to say that this category solely by virtue of their sex (or gender as the politically correct crowd insist we use) should have a lower pensions income? Some 7.6m women work full time and a further 5.8m work part time.

The fabric of society is changing: marriage is less popular and more and more people are living alone and will have to fend for themselves. Women will have no male breadwinner to care for them.

Tailor made

But is the battle of sexes a mere sideshow? 800,000 people will retire in 2012 as the baby boomers become pensioners – think Mick Jagger rather than zimmerframers. The newly retired will want gym membership, satellite TV and expensive holidays and will need an income to match. One way of achieving this is to improve the system at retirement.

In this digital age we must move to bespoke annuities for everyone – health questionnaires on retirement should become the norm. It would be an ideal time not only to get individually tailored annuity rates but also a good opportunity as people leave the workplace for them to have a health MOT to set them on a happy retirement road. After all, health is wealth. If financial advisers and health professionals can work together, we will ensure more longed lived pensioners and, more importantly, that they will be in the best of health with an income to match.

The ECJ’s decision, expected to lead to a fall of 3% to 8% in annuity prices for men, should be seen in the context of the extra 18% to 21% income that many retirees miss out on because they do not shop around for the best deal. The open market option (OMO) should become the default option. Tom McPhail, chairman of the Pension Income Choice Association and head of pensions research at Hargreaves Lansdown, sums up the current situation: “It is obvious that after more than 30 years, OMO still is not working. Too few people get the best annuity rate, too few people get the enhanced rates they qualify for and too few look at alternative options that could give them more flexibility in early retirement. This is particularly true in corporate pensions.”

Both men and women deserve better and the problem is urgent. As we play the end game of defined benefit, we must be ready with our opening gambit for the arrival of auto-enrolment in 2012. Millions depend on us.
stephanie.hawthorne@lexisnexis.co.uk