Employee postcodes set to play bigger role in deciding company pension scheme payouts

Employees’ postcodes will play an increasing role in determining the health of a company’s pension scheme, according to experts.

Private pensions provider Legal & General recently announced a trial using postcodes as a factor in deciding pension incomes. People living in low-income areas may receive about 1% extra income in retirement – as they are not expected to live as long.

Jeremy Dell, partner at actuary Lane Clark & Peacock, told Personnel Today that postcodes would become evermore important.

“The techniques that Legal & General has highlighted are part of a trend towards businesses profiling us all in a far more detailed fashion than ever before,” he said.

“This sophisticated approach is highly relevant for assessing longevity risks in pension schemes.”

Dell added that Lane Clark & Peacock was introducing a socio-economic map of pension scheme members based on their postcode “to help inform the demographic assumptions used to assess a pension scheme’s financial health”.

Financial advisory firm Hargreaves Lansdown is working with Legal & General on the trial. Tom McPhail, head of pensions research at Hargreaves Lansdown, said postcodes were already being used for risk profiling of car and home contents insurance.

“Using just age and sex is a blunt instrument for annuity pricing, and it’s a well-established fact that where you live can determine how long you may live,” he said.

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