Women who keep their pensions invested rather than using them to buy annuities could get an extra £400 a year when new EU rules banning gender discrimination come in later this year.

The EU Gender Directive, which will also affect women drivers who currently pay less for car insurance, comes into force on December 21.

Until now, it was unclear until now whether female pensioners would benefit from the new regime.

However, HM Revenue and Customs has this week confirmed that the rules will apply to capped pension income withdrawals.

This means that those women who keep their pension invested via a process called drawdown will be able to draw an extra 8% - or approximately £400 a year - before reaching the maximum income withdrawal limit.


Tom McPhail, head of pensions research at adviser Hargreaves Lansdown, said: "We knew HMRC was going to have to do something, but until now we didn't know what that would be."

Why do the new EU gender rules mean more money for some female pensioners?
Currently, the maximum pension drawdown income rates are calculated using two different tables, one for men and one for women.

This cap aims to ensure that pensioners who keep their retirement pot invested do not draw too heavily on it in the first few years, causing it to run out before they die.

As men tend to have a lower life expectancy than women, the amount of income they can withdraw from their pension has therefore generally been higher.

However, in line with the EU gender directive, HMRC has decided to withdraw the female table so all calculations will be based on the same - male - life expectancy rates from December 21.

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A 65-year-old woman could therefore see her drawdown income increase by £400 - from £4,900 to £5,300 a year.

Is it all good news for women?
Unfortunately not. As mentioned above, women are expected to start paying more for their car insurance from December because insurers can no longer take the fact that women drivers have fewer accidents into account when pricing policies.

Women's annuity rates may also be adversely affected because men can no longer receive higher rates than their female counterparts because their life expectancy is generally shorter.

"It is unlikely that women will benefit from the change to annuity rates, in the short term at least," McPhail said.

"It is, however, worth pointing out that only those who can afford to take on some investment risk in retirement should consider drawdown, despite the potential advantage of waiting to buy an annuity."



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