When executed well, annuity advice can materially improve client outcomes
Annuities may feel like a familiar solution, but they are now in a more demanding regulatory environment. The message from annuity file checks is clear. Annuities are back, but under a much brighter regulatory spotlight. To deliver good outcomes and withstand scrutiny, file quality must rise with them. capacity for loss is irrelevant for annuity advice because the product does not fluctuate in value. However, there is nothing in the regulators rules that backs this up. Annuities involve irrevocable decisions. Clients permanently exchange capital for income, accept inflation risk, and make long‐term choices about spousal benefits and guarantees. All of these factors create potential detriment, and files sometimes fall short in recording why the chosen annuity structure aligns with the client’ s objectives.
Another common pressure point is the treatment of level versus inflation linked annuities. Many files correctly note that clients prefer higher starting income but then fail to evidence a balanced discussion of long term inflation risk. Simplistic or misleading statements, such as suggesting indexed annuities are poor value, continue to appear. Under Consumer Duty, advisers must ensure clients understand any risks and disadvantages present within a recommendation.
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Equally problematic is the assumption that clients fully understand death benefits, guarantee periods and spousal provision. Files must clearly record client preferences and evidence that any misconceptions are addressed.
Whilst the file must tell the story of the advice process, the suitability report should help a client understand the reason why a‘ recommendation’ is suitable for them and can help inform their decision about whether to follow it. Strong reports focus on why the recommendation works linking to the client’ s objectives. Weaker reports are too generic, lack personalisation and are heavily templated, offering little insight into the adviser’ s reasoning and discussions with the client.
A recurring weakness identified is the way decisions are documented. Statements such as“ you said you wanted X” or“ as requested, we proceeded with Y” suggest that the adviser is paying too passive a role in the process. The adviser’ s role to give a professional opinion based on known information, and outline risks and disadvantages so the client is informed; not to act as a facilitator, not order‐taker.
May 2026 | 7