Anyone who has studied annuity pricing knows that your postcode is a significant factor in determining how long you are going to live.

We accept that people who live in economically and socially deprived areas live shorter in retirement and therefore get better annuity rates. Ironically, the vast majority of annuities are purchased by affluent people who are financially self-confident enough to make the purchase. The stats suggest that people with postcodes with low longevity – don’t take advantage. If we had compulsory annuitisation for all but the most wealthy, we would have levelling up in financial services. As it is, the pension freedoms have meant that poor and sick people screw themselves.

In talking to the  Health Foundation, Steve Webb and his LCP partner Jonathan Pearson-Stuttard, make it clear that health should be part of the levelling up agenda. Steve doesn’t make the connections because he has a specific brief on health. I hope he won’t mind me continuing his argument  to include pension considerations.

Because right now , the lion share of pension income is going to those who live longest and live in and local to high longevity postcodes.

Webb’s argument is clear

All the data we’ve seen to date, including in this new report, suggests that despite the government’s focus on levelling up, it’s simply not happening yet on any meaningful level. That’s not surprising because a lot of the causes of health disparities are really deep seated and not amenable to a quick fix approach.

A lot of this is structural, and without preventative action things could get worse. Any future government will need to commit to long-term interventions to tackle health inequalities and be willing to think locally when designing policies.

Health and wealth are linked as Pearson-Stuttard continues

The report shows that 80% of the projected increase in major illnesses in working-age adults will be in the more deprived areas. That will have a big impact on the local economy.

And ​​the more you drill down to small geographical areas, the more unequal it gets when it comes to how long people can expect to live in good health.

There seem two important considerations for pensions here. Firstly, the state pension is , as a result of regional health inequalities , favoring those who need it least.

Secondly, by delinking saving from “pensions” , the auto-enrolment workplace pension is making matters worse. It is only the behavioural bias of the rich to manage wealth rather than be paid pensions that prevents them cashing in on guaranteed pensions.

My suggestions

National Insurance pays for two things – the state pension and the NHS, they are closely linked, the NHS pays out most to those on state pensions.

We live in an era of big data and artificial intelligence , needed to interpret what big data means. The Health Foundation are digging into the silo of big data to understand inequality and so are insurance companies, pension scheme actuaries and so should Government.

My suggestion is that we start targeting resource for the NHS based on need as Webb and Pearson- Stuttard suggest, with a view to giving those with lower life expectancy, the targeted resource that allows them to “live up” to the ages of the more affluent.

This is the kind of policy I would expect from a new Government intent on making the state pension and private pension saving fairer.

I would also expect to see any Government considering VFM from pension contributions to promote pensions rather than wealth management to those with less by way of savings.

Because the pension freedoms aren’t working for those whose savings are being spent rather than pensioned and the state pension is working all too well for the mass affluent, who are least in need of the safety net.

This is not a call for means-testing, or even for linking state pension entitlements to individually under-written life expectancy. It’s a reinforcement of the arguments put forward in this article

Currently, even when you look in health policy documents, there’ll often be a direct quantified target for something like reducing smoking in the population, and then something vague about reducing inequalities. There’s never a quantified target. We need a unit of currency that can help us understand both what the current problems are, and how to prioritise action.

Government work on this is underway, the ONS health index  is a study of these inequalities which can give Government the big data it needs. We know how to interrogate that data , using techniques well know to actuaries and increasingly understood by policy makers.

Along with helping those who cannot work, we need to help those who struggle to work to keep working. That doesn’t necessarily mean hitting them with sticks or even supplying carrots, it means understanding what is preventing them from either wanting or being able to keep active.

Congratulations to the Health Foundation for linking up with Steve and Jonathan and providing such an excellent thought-piece. Let’s hope that it is read widely and in the right circles.