Prudential and lifestyle pension annuity pricing
Prudential currently price individual annuities based on age, sex and fund size. Until recently, these pricing factors have been used across the industry, but this is now changing. From 11 August 2008 Prudential will be introducing Lifestyle Annuity Pricing to external Guaranteed Annuities. Lifestyle Annuity Pricing reflects the fact that a person/s lifestyle affects their mortality and that postcode can be used as an indicator for lifestyle (i.e. there is a strong link between postcode and diet, smoking habits, occupation, wealth and so on).
Through applying Lifestyle Annuity Pricing, those living in less affluent post code areas, where life expectancy is lower than average (other things being equal), will receive higher annuity income than those living in more affluent areas where life expectancy is higher than average. The introduction of postcode as a rating factor therefore will mean that some new annuitants (”less affluent postcodes”) may be better off compared to current annuity rates, and others (”more affluent postcodes”) may be worse off.
The introduction of Lifestyle Annuity Pricing is a key development for Prudential. Lifestyle Annuity Pricing is about bringing a fairer and more transparent solution to annuities pricing to the market and will benefit many customers. It very much supports their strategy of being a Leader in Retirement.
