The Two Nations, a novel written by Benjamin Disraeli in 1845, highlighted in grim detail the growing divide between rich and poor in Victorian society. In today’s Britain, this divide is as stark as ever and its social, economic and political ramifications ever-more visible.

The divide between rich and poor is also evident when it comes to life expectancy. Recent research suggests a person living in a poor neighbourhood will have a shorter life than someone in an affluent area. This has important implications for the retirement sector – both in terms of how financial advisers approach retirement planning and how providers design products and manage longevity risk.

A new report from the Longevity Science Panel, which was set up by Legal & General, shows the life expectancy gap between the richest and poorest areas in England has increased since 2001. In particular, it says a 60-year-old male living in one of the most affluent parts of the country can expect to live five years longer than his contemporary in one of the most disadvantaged areas. This is up from 4.1 years in 2001 – indicating a widening gap between the have and have-nots.

The study, based on ONS data from 2015, also says a male born in one of the most advantaged areas will live 8.4 years longer than his contemporary born in a disadvantaged neighbourhood – up from 7.2 years in 2001.

Differing rates of smoking, obesity, alcoholic consumption and uptake of health services and disease treatment all play a part in explaining the growing gap in life expectancy, according to the report. But crucially, it concluded that levels of income are the strongest indicator of life expectancy.

The finding that income inequality is driving the life expectancy gap has important social and political ramifications. This is especially so in an era when political parties battle to represent the voice of the less-well off in society and the JAM acronym (those that are Just About Managing) is an established part of the political lexicon.

But the widening life expectancy gap between rich and poor is also of critical importance to the pension and retirement sector. In the advice space, life expectancy predictions play a key role in retirement plans and retirement income strategies. Financial advisers use longevity projections to calculate how much one needs to save for retirement and how much income one needs once in retirement.

Using average life expectancy estimates that do not take into account someone’s income or where they live increases the likelihood that such estimates will fall wide of the mark. And this can impact retirement plans. If a person lives longer than expected they may become financially stretched or even run out of money. And if a person lives shorter than expected they could end up leaving large sums of money that could have otherwise been spent in retirement.

Anything that helps us arrive at more accurate life expectancy estimates must therefore be welcomed. And an understanding of how life expectancy differs between the affluent and less well-off could help advisers and planners draw up more individualized and tailored plans.

Ultimately, a multitude of factors drive life expectancy – including genetics, health, lifestyle, diet etc. But it now seems evident that levels of income play an important – and perhaps driving – role and this should be factored into retirement plans.

In the provider space meanwhile, inaccurate life expectancy estimates can inflict serious financial damage on pension schemes. This is particularly the case for defined benefit schemes, as evidenced by the high profile collapses we have seen in recent years.  A 2016 report by Willis Towers Watson said improvements in life expectancy added about 10% to DB pension scheme liabilities over the previous ten years.

Pension funds and annuity providers use mortality and life expectancy projections to manage longevity risk. But they risk getting their sums badly wrong by using conventional life expectancy estimates. Providers would be better able to manage longevity risk if they had accurate and current mortality data for different socio-economic groups. The lack of robust data in this field makes it incumbent upon Government and regulators to make such statistics available and accessible to providers.

Of course, pension schemes can also use longevity swaps to manage longevity risk but the longevity hedging market faces a number of challenges including the prospect of demand outstripping supply.

If pension providers had accurate mortality data for different socio-economic groups, they would also be able to design new products tailored to specific groups – something that would enable them to expand and diversify their offerings.

We already have retirement products designed for people with shorter lifespans. Enhanced annuities were designed for people with poor health or those with lifestyle habits, such as smoking and heavy drinking, that increases the likelihood they will die sooner. There is a socio-economic dynamic at play here because individuals with lower incomes living in poorer areas are more likely to suffer from lifestyle-related poor health. Meanwhile, standard annuity contracts are increasingly taking into account where people live.

Although retirement products catering to people with certain lifespans and lifestyles do exist, the products are limited and the market unsophisticated. There is a need for greater innovation and imagination and more precise targeting. And this is where regulators and policymakers can step in by encouraging and facilitating product innovation.

While great strides have been made in the accumulation phase under auto-enrolment, there now needs to be a determined focus on the decumulation phase to help lower socio-economic groups achieve desired retirement lifestyles.

Understanding the differences in life expectancy among different groups afford providers a unique opportunity to develop a new range of socio-economically conscious products that specifically address the retirement income needs of low earners. As a first step, providers could extend and adapt enhanced annuities so they target low earners in poor areas who will likely live shorter lives than their more affluent contemporaries. The introduction of new annuity strains would, however, need to be carefully managed to avoid the product proliferation pitfalls suffered by the ISA, which has undergone a series of complex and arguably damaging rebranding exercises.

Retirement products catering to people from lower socio-economic groups will need to be launched with carefully targeted marketing campaigns. And they should be simple, functional, accessible and reliable.

Fairness must also be a central building block of any new product range. People who are likely to have a shorter retirement should be compensated accordingly and proportionately with higher rates of income. That seems only logical. But recent trends suggest some people with shorter life expectancies are actually experiencing negative retirement outcomes. Figures from Moneyfacts show income rates offered by enhanced annuities have fallen six times as much as standard annuity rates since 2015. This is a worrying development.

In an age when matters of investment transparency, gender pay equality and socially responsible investing dominate the headlines, the notion of fairness and doing good should not be an alien concept.  Anything that results in a disproportionately poorer retirement for people with shorter lifespans is surely unfair. And it will only serve to widen the gap between the privileged and not so privileged – something that would make our friend Disraeli turn in his grave.