Money News December 2012

Gender Agenda
A major change in the way insurance premiums are worked out begins this month. From 21 December insurers will not be allowed to take any notice of a person’s sex. They will no longer be able to use well established differences between men and women to decide what to charge them for all types of insurance. A ruling by the European Court in a case brought by a Belgian consumer group means that any policy written from 21 December 2012 will have to be priced in what is called a ‘gender neutral’ way.

The biggest effect will be on young women drivers. The Treasury estimates that the motor premiums for women aged 17-25 will rise by nearly a quarter – about £326 – taking them to £1686 a year. Young men on the other hand will see a fall of just 9% or £188. No big insurance company has yet confirmed those estimates or announced the changes that will be made. The good news for Saga readers, though not for their children and grandchildren, is that the difference disappears around the age of 45 and only re-emerges among people in their eighties – when women make slightly more claims than men. So they may see their premiums fall.

There is bad news for men who are about to retire. When men convert their pension pot into a pension for life – an annuity – they get a slightly bigger pension than a woman of the same age with the same retirement savings. That’s because men on average die about four years younger than women so their pension money has to stretch over fewer years. For example for a typical pension pot of £25,000 a man of 65 who didn’t smoke would get a flat pension for life of £122.64 a month, a woman identical in every other way would get £117.28 a month. That difference of £5.36 a month – around 4.5% – will disappear from 21 December. Men will get less, women a little more.

The new gender rules will also mean that life and critical illness insurance will rise in price for women and fall for men. But health insurance and income protection will fall in price for women but rise for men.

http://www.hm-treasury.gov.uk search for ‘gender neutral’.

Age discrimination to end – sort of
People at work have been protected against discrimination on grounds of their age for two years. From 1 October 2012 this protection was extended to the treatment of customers in shops, clubs, hotels, gyms, and by public services and car rental firms. It also protects people from harassment or insult people because of their age.

So age discrimination is now generally illegal. But there is a long list of exceptions.

Concessions that depend on age – such as free travel or reduced membership fees – continue to be allowed by public authorities or private companies. And holiday firms can continue to sell trips to particular age groups – whether it is 18-30 or Saga over 50s!

The biggest exception to the new rule is financial services. The Home Office lists more than thirty areas where age discrimination can continue. This goes well beyond charging more for health insurance or refusing travel cover as you get older. It will still be lawful, for example, to refuse a credit card or a mortgage or breakdown insurance or a bank account simply because the customer has reached a certain age.

Health and social services do not have an exception. The Government has made it clear that health providers cannot make assumptions about whether an older (or indeed a younger) patient should be given a particular course of treatment because of their age and it will be unlawful to deny treatment just because of age. Health and social care providers will be able to consider a person’s age but any discrimination will have to be based on what is called an objective justification. For example an operation may be refused if it can be objectively shown that in general it does no good to older people or is dangerous for them. But the test will be a strict one and the law should ensure better treatment for older people in health and social services.

These new laws will be tested and clarified in the courts. But if you think that you have been unfairly treated just because of your age you should ask why and then complain. The Financial Ombudsman Service will be able to rule on financial cases and others can be taken to the Equality and Human Rights Commission or, of course the courts.

www.homeoffice.gov.uk search for ‘age discrimination’

Inflation manipulation
The way in which price rises are calculated and turned into the rate of inflation is being changed. Readers of this column will remember the change from the Retail Prices Index to the Consumer Prices Index which the Government has used to cut back on the annual increase of things such as tax reliefs, benefits, and public sector pensions. The CPI uses different maths that makes it almost always lower than inflation measured by the RPI. In September 2012, for example, RPI rose by 2.6% while the CPI showed prices just 2.2% higher than a year earlier. So changing to the CPI saved the government money.

But some things have not been changed to CPI – including the annual increase in pensions from employers, as well as index linked investments such as Government bonds and National Savings certificates. Now the National Statistician has decided that the way the RPI has been calculated since 1947 is wrong. And a new way should be found that brings it more into line with the CPI.

Any change would mean that all annual rises linked to RPI would in future be lower than they would be using the original RPI measure. The difference could be 0.5% or 1% a year. Those small changes add up and could mean hundreds of pounds less each year for people who have private or company pensions or index-linked investments. A short consultation period ended on 30 November and any change could be implemented by the Spring.

e-mail Paul Lewis on paul@paullewis.co.uk