What is a Flexible Annuity?
A flexible annuity combines the advantages of an income for life with the
advantages of a certain amount of flexibility and control over income payments,
investment options and death benefits
Flexible Annuities give you to greater control over your annuity
When a traditional (non-profit) annuity is set up, the options selected cannot
be changed a later date even if the circumstances change. For instance if
it is a joint life annuity and the partner dies first the annuity cannot
be re-priced to reflect the higher rates for a single life annuity. Or if
your circumstances changed and you wished to alter the level of income,
you cannot change your income.
However a Flexible annuity gives you income flexibility, investment control and choice of death benefits. - There are currently four types of flexible annuity
The Annuity Growth Account (AGA) from Canada Life
- Flexibility is achieved through a 5 year temporary annuity
The Flexible Lifetime Annuity (FLA) from Prudential
- Flexibility over income, investments and death benefits up to age 85
The i2Live Annuity from Lincoln
- This is part of the Lincoln's innovative i2Live range of retirement products
that include a guaranteed income for life option.
The advantages of Flexible Annuities
- Provide more flexibility than standard annuities
- Wider range of investment options than with profit or unit linked annuities
- Choice of death benefits
- Combines the advantages of an income for life with some of the advantages of drawdown
- Flexibility after age 75
The disadvantages of Flexible Annuities
- Future annuity payments may be lower than expected if investment returns are lower than projected
- Increases in future life expectancy can be passed on to the policyholder through changes to survivor bonuses
- Investment returns and survivor bonuses may not be sufficiently high to compensate for mortality drag
Risk Warnings
- The income from a Flexible Annuity is not guaranteed and may fall as well as rise. This means that they are more risky than standard annuities
- past performance is no guide to the future
Suitable for |
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Those who are attracted to the concept of annuities
but want to invest in equities and are prepared to accept the higher
risk in return for the opportunity for future income growth. |
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Flexible annuities are suitable to those who want greater
control over their annuities. |
Advantages |
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Flexibility of income, investment control and better death
benefits. |
Disadvantages |
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Disadvantages The principle risk is investment risk, but the potentially
reduced mortality cross subsidy and higher charges should also be taken
into consideration.
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