Flexible or open annuity

The problem with conventional annuities is that they

Don’t allow you to participate in future investment growth
Don’t enable you to vary your income through retirement
Don’t allow you to pass your fund through to your heirs

With Profit and investment-linked annuities overcome the first problem, phased retirement and income drawdown help with all three to an extent. Flexible annuities can also help - some call these "third way" annuities.

Until A Day (6th April 2006) there were two main products of this type:

Canada Life Annuity Growth Account
Prudential Flexible Lifetime Annuity

More recently products have been introduced by The Hartford, Lincoln Financial, Living Time, and MetLife. All of these third way annuities are variations on the theme of combining the benefits of annuities and drawdown. While these new products are commendable in offering more choice, there was only limited demand for the earlier Prudential and Canada Life products, and our experience was that once detailed workings of these products were set out for clients, they tended to opt for one of the more familiar alternatives, annuities (conventional or with profits) or income drawdown.

Nonetheless we will take these products into account where you require a more detailed review of your circumstances and the product range (the option 3 service level).

CHECKLIST: Is a flexible annuity right for you?

	About you and your attitudes	Yes/No
1. Amount of pension fund	More than £100,000 (after tax free cash)
2. Alternative sources of income	Several and / or adequate
3. Value of other liquid assets	At least reasonable
4. Attitude to risk	At least medium
5. Income growth potential	Growth at cost of some risk of falls
6. Income flexibility	Alter income through retirement
7. Inheritability/death benefits	Preserve some funds for heirs

If you answer “No” to either question 4 or 5, you should not go the flexible annuity route.

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