The annuity chosen at retirement, and the way it is documented and implemented, can have lasting consequences for policyholders and their dependants.
In a settlement published in its December 2025 newsletter, the FAIS Ombud examined a complaint arising from a life annuity that did not reflect material terms recorded in the advice process, highlighting key lessons for consumers about the importance of understanding annuity options and ensuring that policy documents accurately reflect agreed terms.
The matter arose from a complaint lodged by a surviving spouse following the death of her husband, who had invested a portion of his retirement savings in a life annuity. The Ombud was required to assess the conduct of both the intermediary who provided the financial advice and the insurer that issued the product, with reference to the obligations imposed by the General Code of Conduct for authorised financial services providers.
Background to the complaint
The complainant lodged her complaint with the Office of the FAIS Ombud in January 2025. Two respondents were cited. The first respondent was the independent intermediary responsible for the financial service and advice provided to the complainant’s late husband. The second respondent was the product provider that issued the life annuity and was responsible for disclosures made when the policy was amended.
The complainant’s late husband invested R1.3 million in a life annuity with the second respondent in March 2021, following advice from a representative of the first respondent. The annuity provided a guaranteed income and included a life cover benefit.
Upon the policyholder’s death, a life cover benefit of R250 924.95 was paid to the complainant. She contended that the product implemented did not accord with what had been discussed and recorded during the advice process. In particular, she alleged that no proper needs analysis had been conducted, and she had suffered financial prejudice because of the reduction in the life cover benefit.
The complainant requested that the intermediary implement the annuity as originally recommended and compensate her for the financial prejudice she alleged had been caused by negligent advice.
Responses from the intermediary and the insurer
In its response, the intermediary submitted that the deceased had purchased the annuity and life cover after having been provided with the relevant proposals. It further stated that he had signed all the required documentation, including the Minutes of the Meeting, the Record of Advice, and the application form.
According to the intermediary, these documents confirmed the deceased’s intention to invest R1.3m in a life annuity, withdraw a tax-free lump sum of R400 000, and nominate his wife, the complainant, as the sole beneficiary.
The intermediary maintained that the deceased had later elected, on his own initiative, to reduce the life cover to lower his monthly premium from R2 434.95 to R509.57, without seeking additional financial advice. On this basis, it denied any misrepresentation or failure to comply with its obligations under the General Code of Conduct.
The insurer confirmed it had made the deceased aware of the consequences of reducing the life cover benefit. It also stated that it could not respond to the financial service rendered or the advice provided, as this had been delivered by an intermediary who was independently registered with the Financial Sector Conduct Authority.
The Ombud’s assessment of the evidence
In assessing the evidence, the Ombud identified several shortcomings in the advice and documentation process followed by the intermediary.
First, the Ombud found that the deceased had not been provided with advice in a timely manner. In particular, the Record of Advice was signed only after the policy quotation had already been signed. The Ombud noted that this sequence was inconsistent with the purpose of the Record of Advice, which is intended to support informed decision-making before a client commits to a product.
Second, the Ombud identified inconsistencies between the advice recorded and the policy that was ultimately issued. The Record of Advice reflected that the deceased had opted for an escalating annuity with a 10-year guaranteed period. However, the signed policy did not include any such guaranteed period.
The Ombud therefore found that “the policy enacted did not align with the advice rendered”. It concluded that the advice was “incorrect, misleading, and not in line with section 3(1)(a)(i)–(iv) of the General Code of Conduct”, which requires that information provided to clients must be factually correct, clear, and not misleading.
The Ombud further emphasised that section 3(1)(a) also requires that advice be adequate, appropriate, and provided in a timely manner to enable clients to make informed decisions.
Reduction of the life cover benefit
In relation to the reduction of the life cover benefit, the Ombud reached a different conclusion.
The evidence showed that the deceased had exercised his discretion as policyholder to reduce the premium payable under the policy. The Ombud found that the insurer had advised the deceased that reducing the monthly premium from R2 434.95 to R494.57 would result in a corresponding reduction of the life cover benefit to about R260 000.
This interaction between the deceased and the insurer was found to satisfy the requirements of section 3(1)(a)(i)–(iv) of the General Code of Conduct, as well as section 3(1)(d), which provides that a financial service must be rendered in accordance with the contractual relationship and reasonable instructions of the client.
Accordingly, the Ombud did not find that the insurer had acted improperly in relation to the reduction of the life cover benefit.
Outcome and compensation
In light of its findings regarding the intermediary’s non-compliance with the General Code of Conduct, the intermediary initially offered the complainant a goodwill payment of R250 000. The complainant rejected this offer and requested that the Office of the FAIS Ombud provide guidance on what would constitute a just and equitable quantification of the damages suffered.
The Ombud requested the intermediary to submit a revised offer supported by an actuarial calculation. This calculation was to include a 5% per annum escalation on the remaining payments that would have been payable had a 10-year guaranteed period been implemented, as recorded in the Record of Advice.
Following this process, the intermediary increased its offer to R613 088. The complainant accepted the revised offer, bringing the matter to a conclusion.
Lessons highlighted by the Ombud
In publishing the determination, the FAIS Ombud highlighted broader lessons for consumers and financial services providers alike. The Ombud noted that decisions taken at retirement, including the choice between a life annuity and a living annuity, are generally permanent and can have serious consequences for surviving spouses and children who remain financially dependent.
The Ombud reiterated that financial services providers have a duty to ensure that retirement options recommended are appropriate to a client’s specific needs and that clients are made aware of all material terms that could affect their financial security.
The Ombud further emphasised the importance of consumer awareness, stating that individuals should familiarise themselves with the options they are entering and ensure they understand the implications of those choices to make informed decisions.
