Postcode Annuities

There have been changes recently in the way some of Britain’s biggest insurance companies calculate the annuity rates they offer. Several now take people’s postcodes into account when calculating their rates, and this can make a difference of up to 10% in annuity income.

Where you live affects life expectancy and annuity rates

Where you live can have a big impact on how long you will live

Average male life expectancy in central Glasgow, for example, is 70.7 years, whereas in London’s wealthy areas of Kensington and Chelsea it is 84.3 years, according to official data.

Therefore, someone living in what constitutes a ‘healthy’ postcode area is statistically likely to live longer than someone living in what might be termed a ‘less healthy’ postcode area. As a result, the annuity provider will probably have to make annuity payments for longer to someone living in the ‘healthy’ area.

What does this mean?

It means that the annuity income will be lower for someone living in a ‘healthy’ area, because it’s being paid out for that much longer. Conversely, someone living in a ‘less healthy’ area is not expected to live so long, so any annuity payments will probably be paid for a shorter period, and therefore the annuity income will be higher.

It also means that we are seeing more bespoke annuity rates, with individual underwriting in many cases. Please contact us if you would like some annuity quotes prepared to find the best annuity rates to match with your personal requirements. 

The postcode difference can be significant

Some companies reckon there could be a 5%-7% difference, and possibly up to 10%, in the annuity rates an individual will be offered, depending on where they live.

Example annuity quotes

Prudential’s annuity quotes show that a 65-year-old man in Chelsea (SW3 5HD) who has £50,000 to spend on an annuity would see that converted to an annual income of £3,128. Someone of the same age and with the same purchase price in the Blairdardie area of Glasgow (G15 6PD) would get just £3,361. That’s a massive 7% more, or £233 each year. (January, 2010 figures assuming a single life conventional annuity, paid monthly in arrears, with a five-year guarantee).

Data from the Office for National Statistics

Data from the Office for National Statistics (ONS) suggests that people living in areas such as Fareham and Hart in Hampshire, Elmbridge in Epsom, East Dorset, Wokingham in Berkshire and South Cambridgeshire, for example, will suffer from lower annuity incomes because they are expected to live to at least 81 years of age.

However, those living in several parts of Scotland (Glasgow City, West Dunbartonshire, North Lanarkshire, the Outer Hebrides, and Renfrewshire, for example), plus Belfast, Blackpool and Manchester, are among those who potentially stand to gain the most from the change in which annuity rates are now being calculated.