UK - People in affluent areas will get less from their pension pot than those in poorer areas under controversial plans being drawn up by Norwich Union.
The firm – part of insurance giant Aviva – has been looking at the impact of geographical location on life expectancy and claims it is now just five years away from pricing annuities accordingly.
Under “postcode annuities”, people living in wealthier areas will receive less because they are expected to live longer than those in other regions.
But the move has been attacked by other market players, who claim it runs counter to the development of annuities.
The Annuity Bureau managing director Peter Quinton said: “Traditionally, annuity innovation has been fair.
“Using the postcode as the over-riding factor for calculating an annuity rate would be wholly unfair as this only takes into consideration one factor in an individual’s make-up.”
Although the concept of individual annuities – which use traditional factors, as well as others such have location to determine rates – have been in the market for the past five years, they have been the domain of small insurers.
But because of Norwich Union’s size, it is expected other big players will follow suit.
Hargreaves Lansdown pensions research manager Tom McPhail said: “I suspect in the next five to 10 years we’ll get to a point where almost everybody has a bespoke, underwritten, individual annuity rate.
“Companies will look at you as an individual risk – things like health, exercise, where you live, previous occupations and how much you travel.
“These things will come into the mix, as well as traditional fare like gender, and if you smoked.”
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