L&G pays post code pensions

by Gill Montia

Story link: L&G pays post code pensions

Legal & General (L&G) has begun paying its pensions according to life expectancy.

The company has completed a pilot study that took into account regional health factors, and will now pay higher pensions to people who live in areas where life expectancy is short.

The system is based on postcodes and the variance will be in the region of 2% to 3% per annum.

According to Simon Gadd, L&G’s Managing Director for Annuities: “If a customer provides us with their postcode we will look at that against our database. If we think that postcode corresponds with an area where people are relatively poor, we can proxy that against a lower life expectancy and we can give those customers a slightly better pension.”

L&G is reassuring customers in wealthy areas that the additional cost will be met from profits from new business, and not by reducing their pensions.

The new system is fairer as, for example, life expectancy in Glasgow can be up to ten years less than in Chelsea, which is one of the richest parts of London.

It can therefore be argued that if an insurer pays the same pension to everyone, the poor are subsidising the rich.

A similar system works with annuities, where those in poor health receive a higher pension.

Mr Gadd expects the principle be extended so that: “Over time more factors will be introduced: obesity could come into it, what kind of job you do, salary and so on.”