A new annuity product is launched every other month these days, or so it seems.
Some have pushed the boundaries while others have been little more than tinkered me-too propositions. But the new flexible lifetime annuity from Prudential pushes the boundaries further than ever. Given the level of interest in annuities, the timing of its arrival couldn't be better.
The flexible lifetime annuity has a range of innovations. Although I wouldn't go as far as one Pru spokesman who says: “One day, all annuities will be like this.” I think it will be well received – once the details have been thoroughly digested.
In simple terms, the new product is an investment fund from which clients take income. Sounds like income drawdown but it isn't. It is still an annuity and still provides mortality cross-subsidy. This will operate openly through the regular addition of bonus fund units.
The income that can be taken is subject to a maximum, quoted at outset and every three years thereafter, and a minimum which is simply half the maximum. Providing the amount taken is between these limits, clients can vary their payments and take ad hoc instalments as required.
As for drawdown, this flexibility gives tax planning oppor-tunities as well as the opportunity for a tailor-made income.
So with all this (and more) why won't it be a panacea? The principal answer is investment risk which is inherent in the product.
Anyway, if one product could solve all the problems, who would need advice?
David Marlow is head of marketing at The Annuity Bureau