More than five million people will be able to sell their annuity from 6 April 2017!

DaveMcG

PensionTech wrote: »

Let me ask you this question: if evidence shows that people of a certain ethnic background have a different life expectancy, would you expect the entities valuing the policy to take an individual's ethnic background into account?

If I was an investor in a fund that bought these annuities, I would expect the person being paid to value the annuities to use every source of information available.

If a fund only purchased annuities from white women in SE England who is going to take action against them and on what grounds?

PensionTech

If it's underwritten, then yes, of course. The Scots get better annuity rates than the English, is that racism?

My point is that ethnicity is a protected characteristic much as gender is. Residential location is not. So in the same way that it's easy to imagine that third parties won't be able to choose annuity purchases on the basis of whether the policyholder is black or white, it is also easy to imagine that they won't be able to choose on the basis of whether the policyholder is male or female, because that would be prohibited by the equality legislation. And there is a very simple way to enforce that: don't release information about the gender of the policyholder.

I am not saying that it's sexist or racist or anything-ist to take into account factors such as sex or race if there is a statistically significant link between that characteristic and life expectancy; there are obvious reasons why it is sensible to take that into account, in much the same way that it's sensible to take that into account when pricing an annuity. I am simply saying, in answer to the question of whether such selection would be in breach of the Equality Act, that I believe it would - and I think it reasonable to expect that this will be enforced. And I reiterate: purchasing annuities will be a regulated activity.

DaveMcG

Hiding personal information while still releasing medical information simply isn't going to work. And if the idea is simply to release age and annual amount then the risks for the buyer are going to be so great that a competitive market will never be created.

System

DaveMcG wrote: »

And if the idea is simply to release age and annual amount then the risks for the buyer are going to be so great that a competitive market will never be created.

How much would you bid for an unseen car of undisclosed make if the only information was its age?
Not a lot.

Would it make it any better if all cars on sale that day had been bundled together, and you were guaranteed the life expectancy of the average?

chucknorris

Clifford_Pope wrote: »

Why would you want to buy an annuity tied to the life of a complete stranger, when you could buy one based on your own life?

You'd spend the rest of your life worrying about his health, his driving abilities and his drinking habits, and then at any moment he might drop dead and your income would be gone.

Exactly, I don't particularly like annuities, but I can see some advantage in them as a hedge against living longer than I anticipated. But imagine if I bought an annuity based on someone else's life, and they died early, but I lived for much longer than anticipated, that would be a terrible outcome. I think institutions selling annuities will be mainly the ones buying them, creating a spread price for themselves.

Aretnap

Malthusian wrote: »

If it's underwritten, then yes, of course. The Scots get better annuity rates than the English, is that racism?

Based on postcode, not on ethnic origin though, Shirley? Someone living in Easterhouse may well get a different rate than someone living in Chelsea, but a scot living in England would get the same rate as an Englishman living in England wouldn't they? I suppose if you'd lived in Easterhouse for 40 years before moving to Chelsea the insurer could take that into account... but someone born in Chelsea to Scottish parents would certainly get the same rate as someone born in Chelsea to English parents.

As far as I can see discriminating on the grounds of ethnicity, as opposed to residence, would be a straightforward breach of the Equality Act. It contains an exemption which allows providers of financial services to discriminate on the grounds of age, but not ethnicity or (nowadays) sex.

Aretnap

chucknorris wrote: »

Exactly, I don't particularly like annuities, but I can see some advantage in them as a hedge against living longer than I anticipated. But imagine if I bought an annuity based on someone else's life, and they died early, but I lived for much longer than anticipated, that would be a terrible outcome. I think institutions selling annuities will be mainly the ones buying them, creating a spread price for themselves.

Anyone wanting to buy second hand annuities will have to be regulated by the FCA (link), so as a private individual you wouldn't be able to buy someone else's annuity, even if you wanted to (and I agree that it would be a lousy idea).

DaveMcG

Clifford_Pope wrote: »

Would it make it any better if all cars on sale that day had been bundled together, and you were guaranteed the life expectancy of the average?

Slightly better, but it would still be the average of sellers and this would have an enormous bias towards poor health. So, in particular, women in good health would be hugely disadvantaged by that system.

Aretnap

DaveMcG wrote: »

If I was an investor in a fund that bought these annuities, I would expect the person being paid to value the annuities to use every source of information available.

If a fund only purchased annuities from white women in SE England who is going to take action against them and on what grounds?

Any black person and/or man from whom they refused to buy an annuity would be able to take action against them for racial and/or sexual discrimination under the Equality Act. Much as you could currently take action against an insurer who refused you cover, or gave you a less favourable premium, on the grounds of race or sex. Or for that matter, a used car salesman who said "sorry, I don't buy from women, or blacks".

This is not exactly new or shocking - people offering annuities already have to come up with criteria for valuing them which don't take sex or ethnicity into account, and it won't be difficult to reverse those criteria to value a second hand annuity without taking those factors into account.

Of course there are indirect ways of trying to skew the range of people you're buying annuities from. It would be legal, for example, for an annuity buyer to advertise in women's magazines but not in men's magazines. And they could of course refuse to buy from anyone in demonstrably poor health. But they'd still have to buy an annuity from a man if he applied, and ticked all the other relevant boxes.

DaveMcG

Aretnap wrote: »

This is not exactly new or shocking - people offering annuities already have to come up with criteria for valuing them which don't take sex or ethnicity into account, and it won't be difficult to reverse those criteria to value a second hand annuity without taking those factors into account.

Firstly as I think I mentioned earlier there is a difference between a business seeking to sell annuities to the public and this scenario where valuations would be presumably confidential and the valuer has a duty of care towards the potential purchaser (investment fund etc).

To further stir up the can of worms, a 70yo woman in good health from the South East asks her adviser if she should sell her annuity. When he tells her that she is much less likely to achieve the true value of her policy than a 70yo man, because the market isn't allowed to use gender in its valuation, has anyone broken the law?