Legal & General has started pricing its retirement products according to its customers' postcodes, paying out more money to pensioners who live in areas with lower than average life expectancies, such as Glasgow.
The new pricing structure was introduced yesterday – following the successful completion of a recent pilot study in conjunction with Hargreaves Lansdown, the financial advisers – and applies to quotes on the group's conventional annuity products.
The insurer has assured customers that it will not offer a quote below its standard rate for those in more healthy areas. However, customers living in parts of towns such as Glasgow, Manchester and Liverpool – which have some of the lowest levels of life expectancies in the country – could qualify for an extra 2 or 3 per cent on their pension each year.
For example, a single female aged 60 with a pension fund of £30,000 would receive an annual income of £1,875 at L&G's standard rate. However, if they happened to live in an area where they qualified for an upgrade, someone of the same age could end up receiving an income of £1,931.
"Our approach ensures that the longevity risk for our customers is more accurately assessed and is then reflected in the improved rates we are able to offer," said Simon Gadd, the managing director of L&G's annuities business."
Tom McPhail, the head of pensions research at Hargreaves Lansdown, added: "This is a bold step that will shake up the annuity market."Reuse content