The European Court of Justice has ruled that gender-based insurance rates are unlawful in a move that could lead to a shake-up in the annuity market. This major ruling takes effect from 21 December 2012 and will fundamentally reshape the retirement landscape, leading to the likely equalisation of annuity rates for men and women. This ruling means it will be imperative that every investor shops around with their pension fund at retirement; if they don’t they risk ending up with a homogenised standard–issue annuity which is almost certain to be a poor deal for them.

Following this announcement, it would be natural to assume that rates may drift towards the middle of where male and female rates currently stand. However, to begin with, insurers might be very conservative about the annuity rates they offer and we could see rates for men cut to where female rates are without much, if any, rise in rates for women.

The ruling may also encourage insurers to build more personalised pricing systems, leading to annuity income becoming more related to you and your individual lifestyle. To some extent this process is already under way with the expansion of enhanced annuities offering a higher income if you have health problems or are a smoker.