WIREDGOV

"Today's ruling will have a major impact on the UK pensions industry and employers providing pensions. To date, male and female members of defined contribution pension schemes with the same pension savings at retirement have usually received different amounts of pension. Women receive a smaller monthly income on the assumption they will live longer and therefore receive their pension income for longer. Today's ruling means schemes and pension providers will have to ensure women receive the same amount each year as men, regardless of life expectancy assumptions. Most likely, this will mean pension income reducing for men to the levels currently provided for women.

For defined benefit pension schemes, this will also mean change. The extent of change will vary from scheme to scheme but in general tax free lump sums and pension transfer values at least will need to be adjusted. This will increase costs, with equalised payments potentially leading to larger pension funding deficits. The compliance deadline of 21 December 2012 will provide some opportunity for reflection and planning but this is a new risk that employers need to manage with care.

The change in pricing of annuities from insurance companies will also impact the costs of bulk buy-outs of pension schemes. We can foresee innovative changes in the insurance markets, perhaps encouraging more sophisticated capital market products such as swap contracts which may bypass the gender effect if pricing depends on a much more detailed range of individual characteristics."