The blue, white and red squadrons ordered Royal Navy flag officers by seniority. A rear admiral, vice admiral or admiral could hold any of the three colours, with Admiral of the Fleet above them. The active flag establishment grew from roughly 29 officers in 1769 to 191 in 1812 as wartime demands expanded the service. Superannuation allowed the Navy to promote an ageing captain to rear admiral while removing him from active employment. The system made seniority visible and gave a very large service more ways to rank its senior commanders.
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How the colour-squadron rank system worked
The Royal Navy's blue, white and red squadrons created several grades of rear admiral, vice admiral and admiral rather than one rank at each level.