Is it legal for insurance companies to operate post-code annuities?

Primrose

I've read in the press today that many insurance companies will be introducing post-code annuities, meaning that those in "poorer" districts will receive higher pensions than those in "richer" post code areas. Surely this is some form of discrimination - yet another way of robbing us of our hard earned pension savings? I cannot see how this will operate fairly as some people, when applying for an annuity could simply offer their home address as that of a relative's a post code living in a "poorer" area? Or they could rent a property for a few weeks in a "poorer" area until their pension arrangements were finalised?

dunstonh

Surely this is some form of discrimination

No. Household is done that way, car insurance etc. Its been tested in court as well with the others IIRC and found to be lawful.

yet another way of robbing us of our hard earned pension savings?

No as the option to use a post code annuity enhancement is up to you.

I cannot see how this will operate fairly as some people, when applying for an annuity could simply offer their home address as that of a relative's a post code living in a "poorer" area?

That wouldnt work as they would be caught out by the money laundering checks showing a different address.

Or they could rent a property for a few weeks in a "poorer" area until their pension arrangements were finalised?

The cost of doing that would higher than the benefit obtained for more people.

The post code option only enhances the annuity rate (potentially). You cannot get less than default. In the same way smokers get better rates or those that are ill. Even those that have had high risk occupations can get more at times.

TMFTP

Saying "you cannot get less than default" is not strictly true, Dunston. L&G's postcode pricing works in that way, but Aviva and Prudential's don't - the rates may be higher or lower than their previous rates.

Nor is the option to use a postcode enhancement up to the customer - unless they decide to buy their annuity from a provider not using that method.

Emmzi

Discrimination is not automatically illegal. Yes, it's discriminating. No, it's not illegal.

dunstonh

Saying "you cannot get less than default" is not strictly true, Dunston. L&G's postcode pricing works in that way, but Aviva and Prudential's don't - the rates may be higher or lower than their previous rates.

NUs doesnt require a postcode. I got a quote from them this afternoon with and without postcode provided.

Nor is the option to use a postcode enhancement up to the customer - unless they decide to buy their annuity from a provider not using that method.

So, it is up to the consumer then.

sdooley

Given that people in one area of Glasgow were found to have 20 years lower life expectancy than another down the road, isn't it more shocking that for all these years poor people's pension annuities have been subsidising richer ones.

Debt_Free_Chick

Discrimination is not automatically illegal - it's legal and allowable if it can be objectively justified.

In the case of postcode-dependent annuities, the justification would be the statistics that demonstrate that those in certain areas live longer.

bigbloke45

It seems to make a lot of sense.

If you live in a postcode that says you are going to die earlier than another, then I'm sure that you would want to get a better annuity rate.

My only take on it is this; how many people living in the higher annuity rate postcodes could even afford to take out a personal pension?

If, as I suspect, not many! then it seems to me that NU and others are cynically reducing annuity rates and blaming it upon low life expectancy in areas that don't actually have pension annuities in the first place.

Sounds a little like Mr. Brown and his lackeys to me!

turbobob

I've also heard of "discrimination" based on the size of the pension pot. I.e. lower purchase prices could attract a higher annuity rate than the larger ones. I guess the thinking is again linked to wealth and its effect on life expectancy. At its simplest level I guess that someone with a £1m annuity purchase is likely to be pretty rich and expected to live longer than someone with £10k worth of pension.

TMFTP

dunstonh wrote: »

NUs doesnt require a postcode. I got a quote from them this afternoon with and without postcode provided.

Their media releases suggest that postcode pricing is not optional - perhaps offered in the transition period where they haven't processed quotes requested before their active date?

dunstonh

TMFTP wrote: »

Their media releases suggest that postcode pricing is not optional - perhaps offered in the transition period where they haven't processed quotes requested before their active date?

Possible. Although the quote only came through yesterday and clearly shows postcode not included. It was obtained via the NU regional office. So, if transitional, that period doesnt appear to have expired yet.

Also, Assureweb issue NU illustrations in real time and not historic data and they are not asking for postcode on input either. However, they only do non protected rights quotes.