The size of the pension employees receive in future may depend notjust on how much they have saved during their working life, but wherethey live, their occupation and even social status.
While politicians, and consumer lobby groups are campaigning forgreater equality over annuity rates, insurance companies are poisedto set pension payments to more accurately reflect the lifeexpectancy of the policyholder.
Britain's biggest insurer, Norwich Union said on Friday that itexpected to introduce "postcode annuities" by 2006. This willrevolutionise the pensions world by basing retirement income on thestreet where you live.
Most people in Scotland will buy an annuity at some stage in theirlives, following the closure to new members of many salary-linkedpension schemes. This is the contract which effectively converts apensions savings pot to a regular income until you die.
Historically, as with life assurance, annuities were a greatleveller in that everyone received the same income for the sameinvestment, with one major anomaly. Women have been badlydiscriminated against, and can receive anything up to a fifth lessthan a man, because statistically they live longer.
Scotland is littered with elderly women, living alone in direstraits and gender-based annuities exacerbate an already unjustsituation whereby women are the most disadvantaged when it comes topensions.
Help The Aged's Mervyn Kohler explains: "Most didn't have much ofa career or earn any pension. Even when they did, familyresponsibilities prevented them climbing up the ladder. They mainlyrelied on their husband's pension, and that can be sharply cut backor even disappear completely when he dies."
Governments both at home and in Brussels are concerned at the waywomen are discriminated against when they come to buy annuities withthe trivial sums they have managed to save.
The EU is considering a directive outlawing gender-basedannuities, and Labour highlighted the plight of poverty-strickenelderly women in its recent pensions green paper.
Yet insurance companies are moving in the opposite direction,claiming that they are merely following consumer demand.
Scottish Equitable's pensions manager Rachel Vahey explains:"People want the most money they can get, so rather than a one-size-fits-all annuity we are seeing the development of contracts whichmore closely price in the risk."
Companies are already offering a higher income to people with poorhealth, through what are called impaired-lives contracts.
This concept is being developed further through "enhanced"annuities, which can also boost retirement income by anything up to40% for people with health conditions which are not immediately life-threatening.
So far only Britannic and GE Life offer an enhanced option basedon health, although MGM pays higher sums to people from variousoccupations. A shipyard worker, for example, who spent 40 years inheavy or dangerous work might be paid more than white collar staff.
However, next year Norwich Union, which is a market leader, willlaunch enhanced annuity contracts, making them very much the norm.
A Norwich Union spokesman said: "Whereas only one in 20 peopletaking out an annuity might qualify for an impaired contract, as manyas one in five may be able to boost their income through an enhancedcontract."
But this will be just one step in the direction of more accuraterisk-pricing by the company. A year ago, it announced a study ofdeath certificates to see whether basing annuity rates on post codes,in the same way as motor and household insurance would be viable.That study has been abandoned, because it proved too unwieldy andcomplex.
However marketing manager Ian Beggs said on Friday that thecompany believed the data it would accumulate from its experience ofunderwriting "enhanced" contracts would allow it to launch postcodeannuities by the year 2006 or 2007 at the latest.
Beggs said: "The evidence is clear that people die younger incertain parts of the country. Why shouldn't they benefit from ahigher income in the years they have left?"
Postcode pensions set to reect how long we really live; Life expectancy is different across the country so why shouldn't pensions take the postcode factor into account?
The size of the pension employees receive in future may depend notjust on how much they have saved during their working life, but wherethey live, their occupation and even social status.
While politicians, and consumer lobby groups are campaigning forgreater equality over annuity rates, insurance companies are poisedto set pension payments to more accurately reflect the lifeexpectancy of the policyholder.
Britain's biggest insurer, Norwich Union said on Friday that itexpected to introduce "postcode annuities" by 2006. This willrevolutionise the pensions world by basing retirement income on thestreet where you live.
Most people in Scotland will buy an annuity at some stage in theirlives, following the closure to new members of many salary-linkedpension schemes. This is the contract which effectively converts apensions savings pot to a regular income until you die.
Historically, as with life assurance, annuities were a greatleveller in that everyone received the same income for the sameinvestment, with one major anomaly. Women have been badlydiscriminated against, and can receive anything up to a fifth lessthan a man, because statistically they live longer.
Scotland is littered with elderly women, living alone in direstraits and gender-based annuities exacerbate an already unjustsituation whereby women are the most disadvantaged when it comes topensions.
Help The Aged's Mervyn Kohler explains: "Most didn't have much ofa career or earn any pension. Even when they did, familyresponsibilities prevented them climbing up the ladder. They mainlyrelied on their husband's pension, and that can be sharply cut backor even disappear completely when he dies."
Governments both at home and in Brussels are concerned at the waywomen are discriminated against when they come to buy annuities withthe trivial sums they have managed to save.
The EU is considering a directive outlawing gender-basedannuities, and Labour highlighted the plight of poverty-strickenelderly women in its recent pensions green paper.
Yet insurance companies are moving in the opposite direction,claiming that they are merely following consumer demand.
Scottish Equitable's pensions manager Rachel Vahey explains:"People want the most money they can get, so rather than a one-size-fits-all annuity we are seeing the development of contracts whichmore closely price in the risk."
Companies are already offering a higher income to people with poorhealth, through what are called impaired-lives contracts.
This concept is being developed further through "enhanced"annuities, which can also boost retirement income by anything up to40% for people with health conditions which are not immediately life-threatening.
So far only Britannic and GE Life offer an enhanced option basedon health, although MGM pays higher sums to people from variousoccupations. A shipyard worker, for example, who spent 40 years inheavy or dangerous work might be paid more than white collar staff.
However, next year Norwich Union, which is a market leader, willlaunch enhanced annuity contracts, making them very much the norm.
A Norwich Union spokesman said: "Whereas only one in 20 peopletaking out an annuity might qualify for an impaired contract, as manyas one in five may be able to boost their income through an enhancedcontract."
But this will be just one step in the direction of more accuraterisk-pricing by the company. A year ago, it announced a study ofdeath certificates to see whether basing annuity rates on post codes,in the same way as motor and household insurance would be viable.That study has been abandoned, because it proved too unwieldy andcomplex.
However marketing manager Ian Beggs said on Friday that thecompany believed the data it would accumulate from its experience ofunderwriting "enhanced" contracts would allow it to launch postcodeannuities by the year 2006 or 2007 at the latest.
Beggs said: "The evidence is clear that people die younger incertain parts of the country. Why shouldn't they benefit from ahigher income in the years they have left?"
