Legal and General has recently announced its plans to pay a higher pension to those who had a lower wage on the assumption that their life expectancy is lower than those who had a higher income.
Unions have welcomed this announcement and they are urging the Government to consider a postcode strategy when setting state pension age. Research indicates that a man retiring at 68 in Glasgow, is likely to live for less than two years in retirement compared to a man living in Kensington, who earned five times as much salary, who would probably expect to live 12 years after stopping work.
However the Department of Work and Pensions believe that these figures are outdated and it would be unfair to leave younger generations to foot the bill for people living longer.
Our view
This is a very positive move by Legal and General and shows that the pensions annuity income market is going to develop to deliver more innovative products.
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