The ruling by the European Court of Justice in the Test-Achats case takes practical effect from 21 December 2012. This will essentially make it unlawful to take gender into account when pricing insurance products, including annuities. It is clear that insurers will in future offer only unisex annuity rates to members of individual personal pension schemes. However, there remains considerable uncertainty regarding the extent to which the ruling applies to occupational pension schemes and potentially also its impact on group personal pension schemes.

The recent (July 2012) publication by HM Treasury of its response to Test-Achats, which follows both a detailed consultation and also the European Commission's own response, expressed the Government's "disappointment" with the decision, but emphasised that it is binding on the UK. The Government is therefore set to remove an exemption under the Equality Act 2010 which permits insurers to offer gender specific annuity rates which, at least until now, effectively means men obtain better rates as their lower average life expectancy means pensions will not be paid for as long on average as for a woman. However, the Government felt unable to shed further light on the unclear boundary between the Gender Directive, which applies to insurers (broadly, relating to individual contracts which are private, voluntary and "separate from the employment relationship"), and provisions which derive from the Equal Treatment Directive, which apply to occupational scheme trustees. HM Treasury noted that "ambiguity at a European level can only be resolved by further clarity in European law or by the courts".

It is important to note that certain exemptions for occupational pension schemes will remain (at least for now) unchanged under UK law, even after December 21. This includes an exemption which allows trustees to apply to the determination of certain benefits - including transfer payments and credits, early and late retirement, pensions commuted for lump sums and money purchase benefits - actuarial factors which differ for men and women.

However, we understand there is currently considerable divergence of opinion amongst insurers as to whether they will offer only unisex rates, or maintain offers of gender specific rates, to money purchase members of occupational schemes from December 21. The outcome may affect the retirement planning and annuity timing choices for members, as women could benefit from unisex rates from December 21 and men should be aware that the availability of gender specific pricing may be significantly reduced from that date. Although we believe it would be difficult for members to establish a claim against trustees on the basis of a failure to inform them of the changes, many trustee boards are alerting members in advance of December 21.