Post Code Annuity Rates

 

How your postcode could affect your annuity rates

Where you live or where you want to retire may have an impact on how annuity companies treat you when you want to take your annuity.  When an annuity company work out the annuity rate that they will offer you they look at a number of factors one of which is where you live, your postcode.

The annuity company in return for your lump sum offer you a guaranteed income for life. In effect they are taking a calculated risk that the annual income that they pay you in retirement will be less that the lump sum you give them plus the return they will have received by investing this sum.  So in short they are trying to work out how long you will live.  Factors they consider include health, lifestyle (including if you are a smoker) and your postcode.

Annuity companies use postcode to determine life expectancy. Figures release in 2011 by the Office for National Statistics (ONS) shows that the average life expectancy at birth now stands at 78.2 years for men and 82.3 years for women. However the life expectancy difference between Britain’s more prosperous and deprived areas has widened to as much as 13 years.  To put this in to context if you where a boy born in Kensington and Chelsea you would have a life span at birth of 85.1 years, and for girls 89.8 years. Compare this to Glasgow City where the life expectancy falls to 71.6 years and 78 years respectively.

The ONS explain this divide as a result of a string of social factors including poorer lifestyles; alcohol and smoking consumption levels; the amount of people living in deprivation; local services availability; environmental conditions; and social class and socio-economic status.

Many annuity providers use this data to construct their rate tables. So if you live in a wealthy area with a higher average life expectancy you will be expected to live longer that someone living in a more deprived area. And because you are expected to live longer the annuity rate you will be offered may be lower than someone would receive in a less prosperous area. This is because the annuity company realise that they will probably have to make annuity payments over a longer period because you will live longer. It is estimated that your postcode could make a difference of 5%-10% on the annuity rate offered.

Postcode annuity rates are just one of the factors that you need to take into consideration when you are coming up to retirement. Getting Independent Annuity Advice will make sure that you make the right decision and get the best annuity rate. Contact us now for more information.