A stark postcode lottery in life expectancy is set to see the Department for Work and Pensions (DWP) pay some state pensioners over £140,000 less over their retirement than others, according to a new analysis.
The Shocking Value Gap in State Pension Payments
Research by Times Money, using recent Office for National Statistics (ONS) life expectancy data, has uncovered extreme regional disparities in the total value of the state pension. The analysis calculated that a woman living in Kensington, west London, and dying at the area's average female age of 88.9 years would receive £403,689 in state pension payments during her retirement.
In stark contrast, a woman living in Glasgow, which has the UK's lowest female life expectancy at 83.1 years, would receive a significantly lower sum. This creates a devastating gap of approximately £140,000 in lifetime pension income, purely based on geographical location and associated life expectancy.
Regional Disparities for Men and Women
The inequality extends to male pensioners as well. The analysis identified Hampshire as the area where men live the longest, with an average life expectancy of 86.2 years. A man retiring there could expect state pension payments totalling around £345,300.
This is nearly £95,000 more than a man retiring in Blackpool, which has the lowest male life expectancy in the country. The research underscores how the uniform state pension age, applied nationally, results in vast financial differences in the total benefit received.
Experts Warn of Systemic Unfairness
Pensions experts have highlighted the inherent unfairness revealed by the data. Adam Cole from Quilter stated: “Regional differences in life expectancy could have a significant impact on the total value of state pension you get. When you factor in that the state pension age is typically the same for everyone, the financial disparity becomes clear.”
Steve Webb, the former Liberal Democrat pensions minister who invented the Triple Lock, offered a radical perspective. He explained that the current National Insurance system pools risk, with those who die early effectively subsidising the pensions of those who live longer.
Mr Webb, now a partner at Lane Clark and Peacock, suggested an alternative model: “If we turned everyone’s state pension rights into the same notional pot at retirement and then put them through an annuity-type formula, you would end up paying higher pensions to people in the north, who could expect to get them for a shorter period, and lower pensions to those in the south.”
He acknowledged this approach isn't perfect but argued it “takes away some of the most extreme unfairness, such as someone dying the day after they retire.” The findings present a major challenge for policymakers, highlighting how deep-seated health inequalities translate directly into a financial penalty for pensioners in areas with lower life expectancy.
