Flexible annuities offer a variety of opportunities and can give clients more control and choice when compared to traditional annuities. Find out more in this article written for advisers.
We are often asked by advisers who haven’t worked with LCA before ‘what is a flexible annuity and how can it benefit my client?’. It’s a great question, and one that we love answering. Our response is straight-forward, just like our flexible annuities.
Flexible annuities offer a variety of opportunities and can give clients more control. Unlike traditional annuities clients have the freedom:
- to choose the level of income, at outset, and then adjust that level whenever they wish. This means that the level of income can decrease as well as rise (typically traditional annuities are not permitted to decrease). Having the ability to decrease the level of income can be a benefit to clients with fluctuating income, for example, the self-employed or when a client starts to receive their state pension.
- to select where and how their sum of money is invested. Throughout the client’s lifetime their money is subject to investment risk, meaning that the investment can fall as well as grow. However, based on the client’s attitude to risk an appropriate portfolio can be chosen to ensure a steady income.
- to add further sums of money. Being able to add further sums gives clients flexibility to, for example, add later inherited wealth or accumulated savings.
As with all solutions there are pros and cons.
- The level of income is not guaranteed. A suitable investment portfolio will need to be chosen to ensure that investment growth is sufficient to cover the level of income being taken.
- The client won’t be able to convert to a traditional annuity if, later, they decide they want a guarantee. This is where the help of an adviser is paramount to ensure that clients are fully informed of all options and the advantages and disadvantages of each.
A flexible annuity can be a versatile solution for clients giving them more control and choice than traditional annuities.
LCA is the home of flexible annuities and offers a Flexible Life Annuity (‘FLA’) and a Flexible Pension Annuity (‘FPA’) for the UK tax resident market. If you would like to know more about LCA or our products, please view our dedicated product webpages below or contact our sales team at sales@stmgroup.online.
This article is based on London & Colonial Assurance PCC Plc’s understanding of applicable UK tax legislation and current HM Revenue & Customs practice, as of November 2024, which could be subject to change in the future.
