NFA Home


NFA Invest

  Phone  01603 452686



Retirement Options




Later Life Issues

Contact NFA


   Retirement Options - Other Annuities - FLAs

Call: 01603 452686


      An Annuity - but with another name


Topical Issues


Elsewhere on this site we have discussed the concept of Lifetime Annuities.


On the current page the focus will be on Flexible Lifetime Annuities (FLAs) after a brief introduction to Enhanced annuities:


Enhanced Annuities:


Enhanced annuities offer one of the very few opportunities in life to actually benefit from your present (or past) vices! So, it is an opportunity that you should certainly not miss if it applies to you!


It is now possible to obtain underwritten annuities for individuals suffering from ill health or having a reduced life-expectancy due to life-style issues (smoking, obesity etc.). In the same way that e.g. smokers may now pay 25% more for their life cover, smokers could obtain up to 15-20% better annuity rates. While underwriting medical problems should always be looked into, severe ill health is sometimes better dealt with via drawdown arrangements or high-level reversionary annuity.


Flexible Lifetime Annuities [FLAs]:


Some of the following observations are based on an article by Nigel Orange in New Model Adviser Feb 08, 2012


Alternative Annuities


For those willing to take a degree of risk with a least some of their retirement funds, Flexible Lifetime Annuities (FLAs) offer a retirement solution that can be adapted to meet many pensioners’ changing needs.


Last year the lowest ever annuity and Government Actuarial Department (GAD) drawdown rates were recorded, and the immediate future looks no better.


Flexible lifetime annuities (FLAs) are just one type of asset-backed annuity with some benefits and characteristics similar to both those offered by drawdown plans and lifetime annuities.


FLAs can provide a secured income option and are regulated by the same rules which govern lifetime annuities. Recent legislation, combined with the challenges of longevity and low annuity rates, have put increased focus on FLAs.


Some of the key difference between FLAs and ordinary drawdown plans, in terms of income, death benefits and the lifetime allowance are summarized below:



FLAs can deliver a higher maximum income than drawdown due to the changes in annuity and drawdown legislation that came into force in April last year (Finance Act 2011).


Capped drawdown income is calculated using the revised GAD table (where the maximum limit has been reduced from 120% to
100% of GAD) whereas FLAs continue to pay a maximum income of 120% of the provider’s standard annuity rate, which can be around 30% more than that available under conventional drawdown.


A minimum income must be provided with a FLA, set at 50% of the provider’s standard annuity, whereas drawdown carries no requirement to take income.

Drawdown does not benefit from any mortality credit, which is an important feature of annuities.


Most providers of FLAs will have an upper age limit after which a fixed income for life must be taken, whereas there is no age limit under a drawdown arrangement.


Death benefits

There is a key difference in the facility in drawdown to pay beneficiaries a lump sum death benefit from return of fund.


Some providers of FLAs offer lump-sum death benefits via an annuity or value protection but the rules allow for the return of the original premium less any income paid out, making fund growth irrelevant.

In both cases, the death benefit will be taxed at 55% so a 10-year guarantee period, if available, with an FLA may produce a better net benefit, depending on your tax position.


Furthermore, ff the guarantee is written under a discretionary trust, it is normally protected from any inheritance tax.


Lifetime allowance

Persons using drawdown, unlike those embracing FLAs, face a further lifetime allowance check (BCE5A) at age 75.


This can be quite important for more affluent clients for whom investment growth is likely to tip the drawdown fund value over the limit of £1.5 million in the 2012/13 tax year. Any excess has to be taken as income and will be liable to a 25% recovery charge.


FLAs versus conventional annuities

Any advantage FLAs have over conventional annuities can only be inferred on the assumption that a client is willing to forgo the certainty and guarantees of a fixed or increasing level of income for life in favour of the greater flexibility offered by a FLA.


Reasons to opt for a FLA could include:


The big drawback of including an escalating or inflation-proofed income with a conventional annuity is the lower starting level, ie the cost.


An alternative might be to opt for a FLA in the expectation that good investment growth will eventually result in a rising income level. However, any positive investment returns could be negated by lower annuity rates when a fixed lifetime income is required.


One advantage of opting for a FLA over a conventional annuity might be on health grounds. An average male aged 65 will enjoy a life expectancy of about 17.6 years and a disability-free life of only 10.2 years.


Deferring full annuitization until an enhanced annuity is possible can make good financial sense.


With a joint life conventional annuity with a spouse, the cost includes cover for the life of the annuitants. If a spouse is significantly older than the main applicant or in poor health, the chances of them pre deceasing the annuitant are significantly increased.


With some FLA providers, if this was to happen the spouse could be removed at the next available review, allowing a single life income to be purchased with a higher income or more for investment.


The vast majority of retirees naturally require (and value) a level of security. However, an increasing number are also requiring greater flexibility, an the possibility of keeping options open for as long as possible.


Striking the right balance between security and guarantees and maintaining a degree of flexibility is not easy – but at least knowing the facts provides an important first step towards making an informed and intelligent decision.   


NOTE: The Pension changes announced by the Government in the Budget 2014 are likely to also affect FLAs but as yet there are no specific details available. PLEASE CALL NFA for further Info.


I don't want to retire right

now - maybe next year, or

the year after...

But, can I afford to cut down

on my work hours already?

     find out more 

Is it a good idea to buy an

Annuity now or is it better

to wait?

Should it be a single or a

joint annuity?

     find out more 

retired couple

What is the best way to

arrange your Investments?

How much risk can you

afford to take?

How much income can  you get?

     find out more 













NOTE: The value of investments can go down as well as up and you may not get back as much as you put in.





Missing some pieces

   of the Pension Puzzle?


               Let NFA help you get

   the whole pictue








Where next?

Who knows...






    Specialist Advice Areas

     Regulatory and Legal changes



Long Term Care is an issue that most of us would rather not think about. But should you, or your loved ones, need it later it can be VERY expensive if you have not prepared.




Although you may be entitled to a full or partial State Pension it is important that you also get to know what other benefits and support you may be entitled to in your later years.  Read More...►


Not very many people are aware of what Powers of Attorney really are or How they Work? You need to know that they In many cases can be of critical importance in a difficult situation.  Read More...►




New rules allow increased flexibility for pension drawdown arrangements. But there are important aspects which need consideration.


   Read More...►




Is Income Drawdown a ticking time bomb?

Law changes and low Gilt yields can have a large impact on drawdown Portfolios.



2 3 4 5 6

   Read More...►


You are always Welcome

to contact NFA for a free discussion

of your

Annuity Options


Phone: 01603 452686










Norwich Financial Advice Limited  is authorised and regulated by the Financial Conduct Authority

and is entered on the FCA Register under FCA reference: 706645

Norwich Financial Advice Ltd. is registered in England and Wales; Company No. 8533929.  

Registered office: 74 Muriel Road, Norwich NR2 3NZ, Norfolk, England.

Decisions should not be taken based solely on the content of this website and individual advice should be sought first.

Regulations, levels and bases of taxation are subject to change.

No responsibility can be taken for any content available via external links from this websites.

The information on this website is aimed at UK residents or residents of MiFID countries