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The Pension Postcode Lottery

The effect

Where you live may affect the amount you receive as a pension. Insurance Companies are now offering different rates of pensions on the assumption that people from different areas will on average live different lengths of time and so can be paid different amounts.

Underwriting

As ever this is just down to insurance companies being more precise with the use of statistics for their underwriting. As they cannot use gender as a rating factor, they have to try and be as accurate as possible. In fact it is surprising that they have only started using postcodes in the last few years.

Once the trend has started then of course all insurance companies must follow suit. Those that don't will be paying higher sums to people who live longer and thus will be disadvantaged.

The aim will not be to maximise profits - market forces see to that. The aim is to attract clients by giving them the best deals possible - although it is likely that those who are rich enough to subscribe to private pension plans are probably living a much better lifestyle than those others living in the area with a short life expectancy.

What can you do?

The only possible thing would be to go and live  for few years in an area of poor life expectancy just before you draw your pension. As you can buy an annuity on the open market the company you put your pension to need not be aware of the fact that you lived somewhere else for many years. 

However, my bet is that insurance companies will ask for the address for the last 5 years, so you will have to spend some time in the 'bad area' before it makes a difference to your pension.

For more information contact JB Portwood john.portwood#portwood.co.uk

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