More commentary about how the ‘better off’ could lose out with their pension annuity payments in retirement because of the lottery of postcode annuities. Retirement income payments will vary according to where people live under a new system launched by leading annuity provider, Norwich Union.
The company, part of Aviva, is using the full postcode of people buying an annuity to determine what their life expectancy will be. It claims that 70 per cent of customers converting their pension pot into an annuity, which provides them with an income for the rest of their life, would be the same or better off following the move. Naturally, therefore, 30 per cent will be worse off, and these will live in affluent areas, as they are expected to live for longer.
A range of rating factors, soon to be brought in by Norwich Union, including the likes of marital status, are currently not included in pricing for standard annuities, although smoking is taken into account for impaired life annuities.
Clive Bolton, Norwich Union director of annuity business, said: “Many customers will benefit from these changes as we tailor quotes to better reflect their individual circumstances and lifestyle.”
It has been said that, until recently, more pricing factors were used in calculating the cost of pet insurance than were used in calculating pension annuity rates.
By focusing on full postcodes, people living in the same city but in different areas would receive differing rates to reflect their individual circumstances.
The group has created nine bands into which postcodes will be placed, with these bands linked to the number of different financial products people in the area have.
Legal & General and Prudential both introduced postcode annuities last year.
