Big changes are coming to retirement planning—and fast.
If you’ve been paying ongoing fees to a financial adviser to manage your pension pot, you might want to take a closer look. Why? Because soaring annuity rates and the Chancellor’s raid on inherited pensions could combine to blow a hole in the traditional “assets under management” (AUM) advice model.
Let’s break it down.
Annuities: From Dead and Buried to Centre Stage
Remember when annuities were considered a thing of the past? Not anymore.
Right now, a 65-year-old with a £100,000 pension can lock in an annual income of £7,639 for life. That’s the highest rate we’ve seen since 2008. And it’s no flash in the pan—annuity sales hit £7 billion last year and are still climbing.
The appeal? Simplicity. Certainty. No more worrying about stock markets crashing just as you start drawing down. It’s the ultimate peace-of-mind product for retirees—a stable, guaranteed income for life.
So, What’s the Catch?
For the advice industry—plenty.
See, most advisers make their money by managing your pension pot. They charge a percentage each year—whether your money goes up or down. But when you buy an annuity, that pot disappears. And so does their income.
In fact, two-thirds of adviser earnings come from AUM fees. Take that away, and many business models start to wobble.
So here’s the uncomfortable truth: advisers have a financial incentive to keep your money invested, even when annuities might be the better choice for you.
Sound like a conflict of interest? That’s because it is.
The Chancellor Just Made It Worse (For Advisers)
As if that wasn’t enough, the government has just brought inherited pensions into the scope of Inheritance Tax (IHT). That means leaving your pension to your kids could now come with a hefty tax bill.
And that changes the game.
Keeping money invested for inheritance reasons suddenly looks less appealing. More people will turn to annuities—not just for income, but as a tax-smart strategy.
Result? Even fewer assets left for advisers to manage. The annuity comeback + pension tax changes = the perfect storm for AUM fees.
The Future is Fixed-Fee
Here’s the good news: there’s a better way.
Instead of charging you more just because you have a bigger pot, fixed-fee advisers charge based on service, not size. It’s transparent, it’s ethical, and it keeps your interests front and centre.
They’ll help you figure out:
- Whether an annuity is right for you
- What type to buy (level, escalating, joint life)
- How to structure your retirement income for security and tax-efficiency
And they’ll do it without any hidden incentives nudging them to recommend one thing over another.
That’s how advice should work.
But Wait—Aren’t Annuities Complicated?
Yes—and that’s where the FCA is falling short.
Right now, annuities are excluded from the regulator’s new “targeted support” plans. Why? Because recommending an annuity is seen as crossing into advice, and they don’t want unregulated firms doing that.
But that leaves a massive advice gap. People are left on their own to navigate one of the biggest financial decisions of their lives—a decision that can’t be undone.
Without proper guidance, many could make costly mistakes. Or worse, avoid annuities altogether and miss out on lifelong financial security.
If the FCA really wants to empower consumers, it needs to rethink its position on annuity support—and fast.
What Should You Do Now?
✅ Ask your adviser how they get paid. If they’re still charging you a percentage, find out how that affects the advice you’re getting.
✅ Explore fixed-fee alternatives. These advisers are already adapting to the new landscape—and putting your needs first.
✅ Don’t rush into an annuity, but don’t ignore them either. Done right, they could secure your financial future and cut unnecessary costs.
Final Thought: A Turning Point
This moment could be the death knell for outdated adviser charging models. And a wake-up call for consumers to take control.
Annuities are back. The pension tax rules have changed. And fixed-fee advice is the only model that truly works in this new world.
The financial advice industry must adapt—or be left behind.
Academy of Life Planning 