William Kay: The lower your annuity, the longer you will live. True or false?

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Over-hyped story of the week was the one about how Norwich Union is going to penalise pensioners who live in posh areas. The effect, NU was saying by the end of the week, will be negligible compared with the traditional determinants of life expectancy: whether you are male or female, your medical history, and your age when you take out an annuity.

Some poor soul at Norwich Union had the unenviable task of going through thousands and thousands of death certificates to see what information can be gleaned about how long people live. Our address is an unsurprising clue, because it has long been known that wealthier people live longer. Lifestyle would be another clue, if only insurers could verify how much we smoke, drink, eat or exercise.

Insurers are set on predicting as accurately as they can how long we are going to live. Different pensioners can expect to receive a similar annuity over their lifetimes; in some cases payback will be over a longer period. It is hard to see dinner parties being enlivened by people boasting how low their annuity is, but insurers are generous only with those who aren't going to stick around long.

One consequence of more accurate pricing is a growth in the impaired and enhanced life annuity markets. Impaired lives have had a stroke or life-threatening illness, and enhanced lives have simply had a serious illness. That covers one in five of us.

In this context, your address will not figure hugely, so it will not be worth moving to a sink estate when you apply for an annuity. But insurers are paying closer attention to the size of your pension pot. The average pot on retirement is £25,000, so people who have built up £1m will set alarm bells ringing because their chances of living longer will be much higher.

All of which suggests it may pay to save for a pension with several providers rather than one, or to keep a lower proportion of savings in pensions. Sadly, the more tricks insurers play, the more they are going to invite retaliation.

* It was as refreshing as a glass of iced water in a desert to hear Michael Watt, manager of Henderson TR Pacific Investment Trust, becoming positively excited about the prospects in Asia.

Not for years have I heard anyone being seriously enthusiastic about any investment prospect, as opposed to the vacuous waffle which so-called experts use to try to drum up business in these dog days.

Plenty of people have tried to call the turn on the Asian downturn, and this may be another false dawn. But economic numbers are pointing to recovery, the China workshop is speeding up by the month, China-Taiwan trade in humming, Vietnam is vibrant and Japan is actually putting up interest rates.

As with the rest of the world's prospects, much hangs on the US's ability to keep sucking in imports and, as ever, the terrorist threat cannot be dismissed.

But Asian companies have started to pay dividends, which makes Mr Watt's other fund, Henderson Far East Income Trust, a tempting bet on its present yield of 4.8 per cent.


William Kay is Personal Finance Editor of "The Independent'

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