Date published: 2007/08/31
The BBC says:
One of the UK's biggest private pension providers, insurer Legal & General (L&G), is starting to use postcodes to price its annuities.
Annuities are policies that provide an income in retirement and are usually bought with the proceeds of private pension plans.
L&G said someone's postcode was a good indicator of how long they will live.
It is using this information in a pilot project alongside data about a customer's gender, age and health.
"Postcodes are already accepted for risk profiling in other areas of insurance, such as motor and household," said Tom McPhail, from financial advisers Hargreaves Lansdown.
The general principle is that the longer you are expected to live, the smaller your annual pension will be, for any particular sum of money used to buy the annuity.
...
Figures supplied by the L&G suggest that people who are identical in all other respects may get an extra 1% added to their income each year if they live in a postcode area where people's average life expectancy is low.The data about postcode areas has been drawn from official sources such as the census and the Office for National Statistics statistics on houses, incomes and marital status.
L&G is also using data from its own customer databank going back over many years.
This has been synthesised into a weighting for every postcode district in the UK.
The plan is that it will be used to improve the annuities offered to people in the areas of the country where life expectancy is reckoned to be the lowest.
But customers elsewhere will not have their annuity offers reduced, said a spokesman.
Well why not, they use everything else. But the idea that "customers elsewhere will not have their annuity offers reduced" is just plain rubbish. This is a zero sum game, and if someone gets (relatively) more, then someone else gets (relatively) less (well, corporate profits also enter into the equation, but you can bet those are not going to be reduced as part of this move). Of course rich people might now start to play the game of using a second address for their pension correspondence in order to be thought to be living in a poorer area than they really are. But if the difference in payout really is just 1%, nobody will bother.
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