Postcodes to define pension benefits

According to Legal & General (L&G), using postcodes gives pensions providers the capability to measure more accurately the longevity risk for those signing up to pension products and the group has developed plans whereby postcodes will be used to help define pension benefits.

The idea is on the basis of those who live in the more affluent and healthy areas of the UK will live longer and should therefore receive a lesser pension than those in less prosperous areas. However, many have highlighted that those dwelling in postcodes deemed as wealthy may die sooner than expected and consequently, have been discriminated against in terms of the payments made during their retirement.

Recent figures indicate that life expectancy in England and Wales is at its highest in the London borough of Kensington and Chelsea, men are expected to live to 80 years and women to 85 years.

In large areas of the South-East and East Anglia, long life expectancy is common but the figures fall significantly for the North-West and North-East England. Male life expectancy is 72 years in Manchester and in Blackpool 72 years and in Liverpool 73 years. Glasgow has the lowest life expectancy in the UK, at 69 years for men and 76 for women.

Using indicators of life expectancy other rather than age and sex is a natural development for the pension annuity market according to L&G. The company draws a comparison with the fact that a customer’s medical history is taken into account, along with lifestyle factors, such as high cholesterol, obesity and smoking.

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