Prudential’s recent decision to offer postcode rated pension annuities marks a significant change in the market trend towards individualised pension annuities. Prudential’s move follows that of Norwich Union and Legal & General. These companies together made up 55 per cent of the annuity market in 2007.
Prudential has said those in less affluent neighbourhoods (perhaps around Glasgow) will see up to a 5 per cent increase in their annuity, but it also admits there will be losers (perhaps around Windsor).
Interestingly, it is likely that all insurers will be forced to adopt individualised annuity pricing or face a huge commercial risk of being left with too many healthy lives. The longevity risk is a major issue.
It is absolutely essential for investors to shop around before drawing their income at retirement, otherwise they will be stuck with an uncompetitive income for the rest of their lives.
