Legal & General – pension will depend on your postcode

Legal & General is to vary your pension depending on your postcode, for instance, in places with low life expectancy, allowances will be higher.

The postcode related pensions have been tested and the insurer said it will now pay higher pensions to people who live in areas where life expectancy is short. However, the company has denied it will slash pensions paid in areas where people can expect a longer life.

Simon Gadd, Legal & General’s Managing Director for Annuities, said if a customer provides us with their postcode we will look at that against our database. If we think that postcode corresponds with an area where people are relatively poor, we can proxy that against a lower life expectancy and we can give those customers a slightly better pension.

For instance, 65-year-olds in Glasgow live around 10 years less than those in Chelsea. Legal & General said the extra cost will be paid for by profits from the new business, not by cutting the pensions paid to people in wealthier areas.

Mr Gadd added that several insurers pay higher pensions to smokers and those with life-threatening illnesses. He concluded that they may pay pensions relating to other issues like lifestyle and obesity in the future.

Billy Borrows of William Burrows Associates, whose business is finding the best pension annuity for clients with a pension fund, commented and said that the new system is fairer. If insurers pay the same pension to everyone, then poor people, who live a shorter time, subsidise the longer lives of the rich.

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