Aviva have just increased the number of postcode annuity rate bands to widen pension annuity rates range. The leading pension annuity company has refined its postcode pricing by introducing further postcode bands, in an attempt, it says, to more accurately provide an annuity income that reflects a retirees’ life expectancy. Aviva (was Norwich Union) introduced postcode pricing in September last year and these changes have been introduced utilising additional pricing techniques used by other areas of the business. In addition, Aviva said it also takes into account certain lifestyle factors; smoking, marital status, age and health when determining pension annuity rates.
Darren Dicks, their head of annuities, said that after a year of trading with postcode annuity rates and using more data from across the group as a whole they have refined their approach to longevity by postcode. There are 1.7 million postcodes in the UK and they have now banded them into different segments. He added that they have now significantly enhanced the number of segments, so there are more possibilities, having always said that a postcode is just a proxy for wealth so the more wealthy you actually are the more likely it is you are going to enjoy a longer life expectancy. When Aviva launched last September they had nine segments, and now there are significantly more.
According to Mr Dicks, in terms of the best and worst postcode annuity rates, Aviva has tried to keep the overall gap the same with the difference being 4.5%. He added that in terms of the impact now these segments have been implemented, a third of customers are getting better annuity rates, a third are getting the same rates and a further third are actually going to get worse rates. Recently, Canada Life also announced plans to introduce postcode annuity rates across its range of products, to join the likes of Prudential, AEGON, Legal & General and Aviva.
