We look at the frightening figures that reveal where you live determines how much your retirement income will be
Move north if you want a better pension. Someone retiring to Blackpool will receive 6% more than someone heading to East Dorset, pension experts say after official figures revealed the huge disparity in life expectancy across England and Wales.
The Office for National Statistics said that average life expectancy for a male in Blackpool is just 73.8 years, nearly a decade less than the 83 years of a man in East Dorset. This area, focused around the historic market town of Wimborne Minster, bordering the New Forest, also has the highest life expectancy for women who are likely to live to 86.4 years. Women in Manchester have the lowest at 79.3 years.
The ONS also calculated how many people are likely to live to the former retirement age of 65. In East Dorset, it is 91% of boys, but only 77% in Blackpool and Manchester.
The figures were for 2009-11 and cover England and Wales only. Data for Scotland and Northern Ireland will be released shortly, and, if past patterns are repeated, Glasgow is likely to have even worse life expectancy.
Local postcodes are increasingly being used by pension companies to calculate the retirement income (called an "annuity") they will pay on the private savings someone builds up during their lifetime in a company pension. The longer someone lives, the more the money has to be spread. Conversely, if life expectancy is shorter a pension company will pay out more.
On a £30,000 fund, the typical size of a retirement savings pot in the UK, the annuity income in Dorset would be £1,747 a year, in Manchester £1,786, and in Blackpool £1,852
Tom McPhail, head of pensions research at Hargreaves Lansdown, says: "These disparities demonstrate why it is so important to shop around for the best possible income. Pension investors should always share as much information as possible with their annuity broker, including your postcode and information about your state of health, as this will contribute to getting you a better level of income."
The north-south divide in longevity is remarkable. The ONS said that from 2009–11, all the areas enjoying long life expectancy were bunched in the south and east. Not a single part of the north or in Wales made it into the top 20% of where people will live longest.
Despite this, overall longevity is improving across the country, and the gap between males and females continues to close. During the four-year period between 2005-07 and 2009-11, the average expectancy for men went up from 77.5 to 78.8, while for women it rose from 81.7 to 82.8.
David Smith, wealth management director at Bestinvest, says: "The average post-retirement life expectancy of a UK male has risen by more than 40% over the past half century, which is clearly good news. However, this is placing huge pressures on the state pension system: it has already been announced that the age at which you will become entitled to the state pension will increase to 66 by 2020, 67 by 2036, and 68 by 2046."
The ONS calculated how long someone can expect to live once they reach 65, and its figures underline the growing number of years a pension has to last. As recently as 2002, the typical retirement for a male in England and Wales lasted 16.1 years. But the ONS said that by 2011 the figure had jumped to 18.4 years. For women, it has increased from 19.2 to 21 years over the same period.
Down in East Dorset women can expect to live 23.7 years once they hit 65, with 90-year-olds becoming commonplace. The strain on the NHS and the state pension system is likely to become ever more intense.
Earlier this month, the ONS revealed that fewer people are saving for retirement than at any time since official records began, with the gulf between private and public sector pensions widening.
In 2012, 46% of UK employees had a pension scheme, compared to more than 55% a decade ago. Despite the growth in the population, membership of workplace schemes fell to 8.2 million in 2011, the lowest level since the 1950s. Meanwhile, estimates of how much individuals will have to save are frightening. To buy an inflation-linked retirement income of £25,000, less than the current UK average salary, now takes a pension pot of £763,900.
Steve Lowe, director at the annuity provider Just Retirement, says: "This country is also facing a divide between those who can and cannot afford an acceptable retirement.
"With annuity rates still low a lot of pensioners are struggling to maintain an adequate level of living."