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Pensions Bill

I support very much the amendment moved so ably by the noble Baroness, Lady Howe. Most of us know the arguments for and against unisex annuities. The arguments for them state that unequal payments are discriminatory, that different life expectancies are irrelevant as there is considerable overlap of the age at which most people die, that they would increase women’s retirement incomes, and that gender is increasingly less relevant compared with health and smoking for annuity pricing. In the arguments against them we may be told that women live longer and therefore their total income produces a broadly similar financial package, that they would cost more for men and therefore reduce couple income, and that they could have a knock-on effect on other areas of insurance policy such as car insurance. As the noble Baroness argued so well, not having unisex annuities is clearly discriminatory. We do not permit discrimination in employment law, and pensions are deferred pay. In the United States and Canada, annuities bought with employment-funded sums must be unisex—in the strongholds of capitalism it is unisex—and the market may not judge by gender. A similar rule would make all DC payments unisex just as DB pension payments are. Unisex annuities are also used in the state pension system in the UK and Sweden. Would anyone in the House believe, as the noble Baroness said, that a DB occupational pension should pay out different pensions for the same pay and years? Should a woman teacher, police officer or civil servant retiring at the same age and on the same pay as a male colleague receive a lower final-salary pension? I cannot believe that anyone in the House would support that, yet we are allowing it to happen in DC schemes because it suits and is easy for the private market. Do we think it acceptable that two office managers, a man and a woman, on the same pay and service, in a final salary scheme for 20 years and with the same pension promise, should expect, when the employer closes that scheme and switches over to a DC scheme, to receive unequal pensions for the next 15 years as a result of the employer’s decision? Is that fair? It is clearly discriminatory. A couple of years ago the Pensions Policy Institute carried out some useful research on the effect of unisex annuities on men’s and women’s financial returns. It found that unisex annuities, despite widespread belief, would not damage men’s retirement income and could usefully improve women’s. In any case, annuity income for most pensioners is only a minor part of their retirement income, which is largely dependent on state benefits. The PPI research showed that at 65 the best unisex rates are the same as a male annuity rate, which is 14 per cent higher than the comparable female figure. The PPI’s figures on £50,000 in 2004-05 were: £2,754 for a woman, £3,149 for a male and £3,151 for a unisex annuity. Win, win. In a competitive market where it was compulsory, the PPI calculates, the male rate might reduce fractionally by, at worst, 3 per cent and the women’s rate would improve considerably, by 10 per cent or more. Annuity rates today, of course, are somewhat higher. It is true that women who only have access to income from their husband’s annuity might lose out if his income took a tiny drop. The identical argument was used against equal pay in the 1950s and the 1960s—that married women were dependent on their husband’s wage and would therefore lose out if other women got equal pay and possibly depressed male rates—and it took the law and Barbara Castle to say that such discrimination was not acceptable. We should say the same about pensions. In any case, three-quarters of annuities are single life, so wives are unaffected, and with joint life annuities, as I have said, there is virtually no difference between the male and the unisex rate. We expect to see women develop their own pensions. If the gains and losses are relatively tiny and it is fair to pay men and women the same final-salary pensions, it is discriminatory not to do so in DC pensions, especially as DB schemes fold into DC schemes. Life expectancy between men and women is narrowing, as the noble Baroness, Lady Howe, said, but life expectancy by social class is wider and widening. Presumably that is why Aviva is going for postcode rates. Let me remind the House of the statistics. Twenty years ago, women lived on average 5.7 years longer than men, and the gap between social class 1 at the top and social class 5 at the bottom was also 5.7 years. Now we are all living longer, but what has happened to the differentials? Women are living three years longer than men—down from 5.7 years—but the social class gap, to my sorrow, has widened from 5.7 to seven years. So the social class gap is now double that of the gender gap and the predictor at 65 shows the same tendency, although not quite as marked. So, if companies wish to cherry-pick they should give those of us with degrees, as a proxy for social class, less favourable terms than those without. Higher education should matter more than high heels in determining annuity rates. Essentially the market is lazy. It finds it easier to identify gender than it does class, and too many men—although, I am sure, not in your Lordships’ House today—are happy to collude with artificial annuity rates that unfairly discriminate against women. As I say, we do not discriminate in final-salary schemes or in state schemes, and we should not allow discrimination in DC schemes—including, in the Bill we are debating today, personal accounts.