Postcode lottery could lose you 20% of income


Chelsea Pensioners

If you work hard and save enough money to move to a nice area you will be rewarded... with a pension income that's 20% lower than it would be if you'd stayed put somewhere less affluent.

But why are retirees caught in this postcode lottery, and what can they do?

Big differences

According to annuity company Partnership, the difference in income can be striking. It got quotes for a 65-year-old with a £30,000 pension fund, buying a standard annuity. It found that someone living in Hull (with an average property price under £68,000) would get a pension of £1,847 a year.

The same person living in Harlow, with an average property price of just over £190,000, would get an annual pension of £1,749 from the same lump sum.

Meanwhile, someone in Kensington and Chelsea with an average property value of £1.13 million would get an income of £1,708 from the same pot.

That's a hit of £3,000 over a typical retirement, based purely on where you live.


The problem is that annuity providers will use your location as one of the factors that determine your life expectancy. If you live somewhere leafy and attractive, it assumes you have an affluent lifestyle and therefore will live longer than average. As a result it will offer you a lower monthly payment from your pension.

This trend has become even more striking recently, as European law means that insurers have been unable to factor in gender when determining your annuity payout, so they have placed a heavier emphasis on things like this.

What can you do?

There are two solutions. The first is to shop around - or approach a company to do this for you. The difference between the best and worst annuity rates for exactly the same individual can be as much as 10% - so it's vital to search the open market rather than accept what is offered by your pension provider.

The second is to disclose any medical conditions. This can include those things you would expect, such as heart conditions and cancer, but you will also see a significant uplift in income from disclosing things you may not have considered such as increased blood pressure or diabetes.

Interestingly, the more affluent the area you live in, the more of an uplift you are likely to see from declaring a medical problem. If you suffer from diabetes, the example in Hull would see a 9% increase, the one in Harlow a 15% rise, and the one in Kensington and Chelsea 18%. The biggest rise in the study was for Elmbridge - where declaring diabetes would see your income rise 19%.

Andrew Megson, Managing Director of Retirement, Partnership said: "Over 3.7 million people are living with diabetes in the UK and just by telling your annuity provider about this condition, people can get up to 19% more annual retirement income. It is vital that when people start to prepare for retirement, they not speak to a variety of annuity providers but also take into account any medical or lifestyle conditions that they may have."

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