Guidelines of the European Commission following the Test-Achats case

The European Commission has confirmed that second pillar pension schemes may continue to work with gender-based mortality tables. The Commission also clarifies for which "new" individual life insurance contracts unisex premiums and benefits will be mandatory.

On 1 March 2011, the Court of Justice decided in the Test-Achats case that as from 21 December 2012, insurance premiums and benefits should be gender neutral (see our Newsflash of 2 March 2011 ).

The Court's judgement raised several issues, however. In particular, the Court did not clearly decide whether the principle of gender neutrality should only apply to new contracts, concluded as from 21 December 2012, or whether it should also apply to existing contracts Moreover, the question also arose whether gender based differences, which are in certain cases still allowed within the second pillar (enterprise- and industry wide pension schemes), could be maintained.

The Commission has since taken these issues up with the national authorities, the insurers and the consumers, and has proposed some guidelines, of which we summarize the most important:

• unisex premiums and benefits in insurance products are mandatory for all new contracts since 21 December 2012. "New contracts" means of course all contracts agreed for the first time as from 21 December 2012. However, extendingan existing contract, which would otherwise have expired, will also be considered as such. A tacit extension of an existing contract, which does not require the signature of the contract parties, will not be considered as a new contract. Nor will the adjustment made to an existing contract, such as premium changes based on parameters, where the change was already provided in the initial contract.
• The Commission confirms that the Test-Achats case has no direct consequences for the second pillar pension schemes. The Commission specifies that the Directive, which applies to second pillar pension schemes, is drafted in a totally different way than the Directive which was the subject of the Test-Achats case. The use of gender related criteria continues to be possible in second pillar pension schemes, as far as it is justified by actuarial factors.

As a consequence, you may continue to use, as long as there is no legislative initiative or judgment of the Court of Justice in another sense, gender-based mortality tables for the calculation of the vested reserves (in defined benefit schemes), or for the conversion of lump sums into annuities or vice versa.