The Court of Justice of the European Union has followed the Opinion of the Advocate-General in the case of Test-Achats (reported in the October 2010 Pensions update) and concluded that the current derogation from the requirement not to discriminate on the grounds of sex in relation to insurance premiums is to be removed from 21 December 2012.  

With effect from that date the UK government will need to ensure that the use of sex as a factor in the calculation of premiums and benefits for the purposes of insurance and related financial services does not result in differences in individuals’ premiums and benefits.

This ruling applies to insurance contracts – not to benefits provided under Occupational Pension Schemes, which are covered by the Equality Act which allows sex-based factors to be used. It applies only to sex – not to age-based factors. This means that annuities purchased from insurance providers on retirement will be subject to the unisex requirement, but that schemes operating internal annuitisation or commutation may continue to use sex-based actuarial factors. One practical effect may be an increase in the cost of scheme buy out and thus have a knock-on effect on valuations based on buy out. As this rule derives from an EU Directive it will not apply directly within the private sector and domestic legislation will be required to bring it into effect.

Read the full judgment here.