The move is part of a restructure of annuity pricing by the provider which will also now take into account the policyholder’s marital status and smoking habits.
NU says there will be a 2 per cent swing between the best and worst rates using the postcode system. It will take the form of nine groupings based on life expectancy in specific areas. For example, Tower Hamlets in London and an inner city region of Glasgow could be in the same group.
Annuities marketing manager Claire Webster says the new structure is a fairer way to price annuities as people in poorer areas with lower life expectancy will no longer subsidise wealthier people. She says 70 per cent of policyholders will be better off as a result.
Webster says: “We are in a favourable position due to the data we have and our expertise from the general insurance market. Pricing for annuities is inherently unfair, with poorer individuals subsidising the wealthy. I expect the rest of the industry to follow and soon there will be no such thing as a standard annuity.”
Legal & General launched postcode annuity pricing last November and a number of other providers are understood to be looking at similar changes.
Hargreaves Lansdown pensions analyst Nigel Callaghan says: “I expect other insurers to follow L&G and NU and they could be at a huge commercial risk if they do not. The repricing will offer investors a wider range of choice and many will receive a fairer deal but individuals must be encouraged to shop around to ensure the deal they get is the best available.”