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Flexibile annuity from the Pru

Prudential is aiming to give clients greater choice and flexibility with the introduction of its flexible lifetime annuity.

This with-profits and unit-linked annuity has a choice of three investment strategies — cautious, standard or adventurous — plus a self-management option that allows investors to choose their own funds. There are 13 funds available including the Prudential unitised with-profits fund and external funds managed by Merrill Lynch, Newton, Perpetual, Phillips & Drew, and Schroder. Fund switches can be made at any time if, for example, risk profiles change with age.

The money left in the annuity funds of people that die early is divided between the surviving annuity holders in the form of a monthly lifetime bonus.

Unlike some annuities where the level of income is fixed at the outset, investors can vary the level of income they take, as long as it does not exceed their annual limit. However, if their funds are not performing well, investors may find they have taken too much income and will have to reduce the amount they take in the future.

The flexible lifetime annuity is a step in the right direction in terms of choice and flexibility, but one drawback is that death benefit is limited to 10 years. Death benefit under income drawdown tends to be better.


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