Gender and annuity ruling - should I cash in early?

cmotd

I understand that from 21st December 2012 annuity rates for men will reduce due to a European court ruling about gender discrimination.

I have a stakeholder pension with a current retirement date of July 2013. Would it be worth cashing it in a bit early to avoid the reduction? If so, how much in advance of December to allow for paperwork to go through?

I am aware that the overall pension pot will be a bit less but would this balance out against the probable lowering of the annuity if I wait till next year?

Zelazny

I think the simple answer is that noone knows. The rates for me will almost certainly reduce, but annuity rates are currently at a historic low due for other reasons, and they may generally increase again soon. We can't be sure.

jamesd

Yes, from then annuities are required to discriminate on the basis of gender instead of being based on life expectancy, so they will have male annuitants cross-subsidising female annuitants.

The problem with buying an annuity now is that annuity rates are lower due to quantitive easing. So there's a substantial chance that you will be worse off by buying now instead of waiting.

Have you considered using capped income drawdown instead of buying an annuity? At least until QE ends and rates have some time to recover?

Loughton_Monkey

It is appropriate to many people to buy "joint" annuities - to protect, say, the wife on earlier death of husband. The equalistion of rates should make far less difference to such joint annuities.

As already suggested, drawdown is a way of avoiding annuities altogether, but it does introduce additional risks that could work either against you , or indeed in your favour.

dunstonh

The rates for me will almost certainly reduce, but annuity rates are currently at a historic low due for other reasons,

They have gone up a couple of times this month. So, the bottom may have been met. Or it could just be a short term wobble.

CannySaver_2

Hi

Personally I can see no reason why Annuity rates will rise in the short term (1 - 2 years) and any small rises is simply providers jockeying for position.

If you need an income now but don't want to lock into current Annuity rates, which are horribly low, you could used Capped Drawdown, although that does bring investment risk with it (usually at least). Alternatively a Fixed Term Annuity, which gives you a guaranteed income now with a guaranteed future maturity value could also work.

There are options, you just need to take time to consider them.

The Canny Saver