Living Annuity FAQs

What is a Living Annuity?

A Living Annuity is a post-retirement investment product that allows you to withdraw between 2.5% and 17.5% of your invested capital annually while keeping the remaining funds invested. You can also allocate up to 100% offshore or diversify between local and global markets.

What happens in a divorce?

The annuity may be split per a divorce settlement order, under pension interest rules.

What is the Living Annuity Calculator?

The Living Annuity Calculator is a free tool that helps you forecast how much retirement income your savings can provide, and how long it may last. By entering your age, savings amount, income needs, and investment returns, the calculator shows your income path, capital trend and financial sustainability. It’s a practical way to plan for retirement with confidence.

Can I bequeath a Living Annuity?

Yes, upon death, your Living Annuity balance is paid to your beneficiaries, who can choose to take a lump sum or continue withdrawals — however, the funds must remain in South Africa and cannot be transferred offshore.

What is the meaning of a Living Annuity?

The meaning of a Living Annuity lies in its flexibility and control. Unlike a Life Annuity, which provides a guaranteed income, a Living Annuity lets you decide your drawdown rate and investment strategy. It suits those who want to manage their retirement income, grow their assets, and leave remaining capital to beneficiaries, while accepting the risks of market performance.

Is this the best retirement calculator in South Africa?

We believe so — because it:

• Combines income modelling and capital forecasts

• Offers advanced contribution and growth inputs

• Is built around real-world investment scenarios
  And it’s backed by financial planners who can help you apply the results to real decisions.

Can I use this calculator for GEPF or other government funds?

Yes, but you must manually input your estimated GEPF lump sum or monthly pension. You can also use the GEPF benefits calculator alongside this tool for more accuracy.

What if I have savings in a foreign currency or offshore?

Convert it to rands for calculator use. If it's in a wrapper or trust, speak to an advisor — some offshore funds have tax and accessibility differences.

What is a comfortable pension in South Africa?

Generally, a pension income of R20,000 to R30,000/month is considered comfortable, assuming no debt and modest lifestyle expectations.

Does the calculator factor in tax on withdrawals?

No, the results are pre-tax. Use our Retirement Income Tax Estimator separately or speak to a planner to model tax-specific projections.

Can I increase income over time for inflation?

Yes. Under Advanced Inputs, you can:

• Set annual increases every 1, 2, or 3 years

• Match expected inflation
  This ensures your purchasing power stays intact.

Can I preserve capital and still draw an income?

Yes. The calculator shows if your strategy maintains your capital or draws it down. Use the income slider and the sustainability marker to see this effect.

What if I plan to semi-retire or earn extra income?

Reduce your target income in the calculator to reflect part-time work. This helps simulate a more flexible retirement plan with lower savings pressure.

Can I see how changing my retirement age affects my plan?

Yes. Adjusting your retirement age (e.g. from 60 to 65) gives you:

• More years to save

• Fewer years to fund

• Higher sustainable income
  Try different ages to see the trade-offs.

What are modelled returns in the calculator?

These are estimated real returns (after inflation) based on portfolio types:

• Aggressive = higher equity, higher risk

• Moderate = balanced strategy

• Conservative = more bonds, lower risk
  You can also manually adjust inflation and returns for your own assumptions.

What if I still want to contribute monthly until I retire?

Use the Advanced Inputs section to:

• Add monthly contributions

• Set the number of months left until retirement

• Include expected salary increases

This shows how additional saving can improve your future income.

What is a Living Annuity and how does it impact my plan?

A Living Annuity allows flexible income withdrawals in retirement. The calculator assumes you're using such a structure. You must balance:

• Capital preservation

• Income needs

• Tax and drawdown risks

What is the Income figure in the calculator results?

Income shows your estimated monthly pre-tax retirement income, based on the assumptions you've entered. You can adjust it using the slider to explore how sustainable different amounts are.

How long will R600,000 last in retirement?

It depends on how much income you draw and your return assumptions. As a rough estimate:

• Drawing R5,000/month = 10–12 years (if returns offset inflation)

• Drawing R10,000/month = 5–6 years
  Use the income slider to model this scenario interactively.

Can I retire with R10 million in South Africa?

Yes — if your expenses are aligned. R10 million can provide around R30,000 to R40,000 per month, depending on:

• Investment returns

• Inflation

• Drawdown strategy
  Use the calculator to test how long R10 million will last based on your age and income needs.

What is the 4% rule for retirement?

The 4% rule suggests you can safely withdraw 4% of your total capital per year in retirement, adjusting for inflation.
For example:

• Capital = R5 million

• Annual drawdown = R200,000 (or R16,666/month)

This is a rough guide and should be stress-tested using a calculator.

How much money do I need to retire comfortably in South Africa?

It depends on your lifestyle, but a general rule is to aim for 70–80% of your final salary as monthly income.
For example:

• Final salary = R40,000/month

• Ideal retirement income = R28,000–R32,000/month

The calculator helps assess if your savings can support this level of income.

Can I include my employer pension or provident fund?

Yes. These are included in Total Retirement Savings. If you're currently employed and contributing to a company retirement scheme, estimate the current value and add it in manually.

What does Sustainability mean in my results?

Sustainability shows how long your savings will last based on your drawdown rate, returns, and inflation.

• If it says “to age 95,” your income lasts until then

• If it says “not sustainable,” your capital may run out too soon

It’s a crucial measure of whether your retirement plan is viable long-term.

What counts as Total Retirement Savings in the calculator?

Your Total Retirement Savings includes all money you've saved in registered retirement products like:

• Pension Funds

• Provident Funds

• Preservation Funds

• Retirement Annuities (RA)

• Living Annuities

This gives the calculator a full picture of your retirement capital for accurate income projection.

Best retirement calculator South Africa

The Investonline calculator includes both Standard and Advanced Inputs, modelling tools for income increases and returns, and provides a complete retirement outlook tailored to South Africans.

Monthly retirement calculator South Africa

Our retirement calculator is tailored for South African users. Input your savings, age and target retirement income to see your results monthly — including Income, Capital and Sustainability projections.

How much does the average 65-year-old have in the bank?

Studies suggest many 65-year-olds have less than R1 million saved, far below the ideal. The calculator allows you to test what that amount would realistically provide in monthly income.

What is the average retirement income in South Africa?

Unfortunately, most South Africans don’t retire with enough. The average monthly income in retirement is well below what’s needed for comfort. Use the calculator to avoid this shortfall.

What is a realistic amount of money to retire with?

Realistically, you want at least 12–15 times your annual expenses saved. The calculator helps you see if your Total Retirement Savings will fund this level of income over time.

What salary is needed to live comfortably in South Africa?

Comfort depends on family size and lifestyle, but many aim for R25,000–R40,000+ after tax. The calculator helps you model what income your retirement savings will support.

How much pension should I have at 55?

A rough target is 7–10 times your annual salary by age 55. Use the calculator to compare your current total savings to this benchmark and test future scenarios with Advanced Inputs.

Can I retire at 60 with 300k?

Unlikely, unless your expenses are very low or you supplement with another income. Input R300,000 into the calculator and set your retirement age to 60 to see your outcome.

How much do most people retire with?

Surveys suggest many South Africans retire with far less than needed. Using the calculator helps create awareness of your savings gap so you can adjust early.

What is a comfortable pension for retirement?

A comfortable pension typically covers 70% or more of your working salary. In the calculator, the Income line shows if your expected withdrawals will match this target over time.

Is R25,000 a good salary?

R25,000 can be a good income, depending on your location, debt and lifestyle. For retirement planning, it’s more about how much you save and invest monthly. Use this as your income input in the calculator.

What is the 4% rule for retirement?

The 4% rule suggests you can withdraw 4% of your retirement capital per year, adjusted for inflation, with a good chance of not running out of money. The calculator shows this visually in the Sustainability section.

How long will 600k last in retirement?

It depends on your monthly income need, investment returns and inflation. Use the calculator to input R600,000 as your total savings, then adjust the Income Slider to see how long the funds will last under different return assumptions.

How much is retirement pension in South Africa?

There’s no fixed pension unless you’re part of a government fund like GEPF. The calculator helps estimate your projected income based on private savings such as RAs, Living Annuities and Preservation Funds.

Can you retire with 10 million rand in South Africa?

Yes, R10 million can offer a very comfortable retirement, depending on your withdrawal rate, lifestyle and inflation. The Income Slider and Sustainability graph in the calculator help you test how much monthly income that capital can safely provide.

How much money do you need to retire comfortably in South Africa?

This depends on your lifestyle, but a common rule of thumb is needing 70–80% of your final salary per year. Using the calculator, you can input your current savings and desired income to see if you’re on track. Focus on the Sustainability value to see how long your money will last.

What is the best Living Annuity in South Africa?

The best Living Annuity depends on your financial goals, investment strategy, and the fees charged by providers. Look for low-cost, transparent platforms offering both local and offshore funds, easy investment switching, and personal support. The ideal product supports capital growth, income sustainability, and a confident retirement.

What exactly is a Living Annuity?

A Living Annuity is a flexible post-retirement income product that allows you to draw an income from your retirement savings while keeping the rest invested. You choose your annual income drawdown (between 2.5% and 17.5%) and manage how your capital is invested. It gives you control, growth potential, and allows for inheritance planning, but it also comes with market risk and requires ongoing decisions.

How are Living Annuities impacted by global recessions?

Investment returns may suffer, affecting income longevity. Lower drawdowns and defensive portfolios can help.

How much should I withdraw annually?

A sustainable rule is 4% or less if you want your annuity to last 25+ years.

What’s a smart drawdown strategy?

• Start near 2.5%–5%,

• Review annually,

• Adjust based on market returns and inflation.

Can I reduce tax on annuity income legally?

Yes—by keeping total income in a lower tax bracket, splitting withdrawals across products, or retiring later.

What the heck is a Living Annuity?

A flexible, post-retirement investment product that lets you draw income while keeping the capital invested—ideal for those who want control and growth potential.

Can I nominate multiple beneficiaries?

Yes—you can split your annuity among multiple beneficiaries with assigned percentages.

How do fees differ between providers?

Providers charge different admin, platform, and fund management fees, ranging from 1% to 3%+ annually.

Can I switch funds without tax implications?

Yes—switching between funds within a Living Annuity is tax-free since it's inside a tax-sheltered wrapper.

Is it flexible for lifestyle changes (e.g. travel or downsizing)?

Yes—adjust withdrawals once a year and switch investments anytime to match your changing needs.

Can I delay income withdrawals after retiring?

No—you must start withdrawing within the first year of converting your retirement funds to a Living Annuity.

Is a Living Annuity good for conservative investors?

Yes—with low drawdown rates and exposure to income-focused portfolios, it can suit risk-averse retirees.

What’s the role of passive vs active investing?

• Passive investing: Lower fees, broad market exposure.

• Active investing: May outperform but comes with higher costs. Choose based on risk tolerance.

Can I take a break from drawdowns during uncertainty?

No—minimum 2.5% annual withdrawal is mandatory. You can draw the minimum and reinvest if not needed.

How often can I switch my Living Annuity provider?

You can switch via a Section 50 transfer, typically once a year. There are no tax consequences if done correctly.

Can I combine my Living Annuity with other income sources?

Yes—combine it with rental income, dividends, pensions, or discretionary investments to diversify income streams.

Which is better: Life or Living Annuity?

• Life Annuity: Guaranteed income, no flexibility.

• Living Annuity: Flexible withdrawals and inheritance, but exposed to market risk

Can I have more than one Living Annuity?

Yes, you can hold multiple Living Annuities with different providers. This can give you greater flexibility in managing investment strategies, withdrawal rates and risk exposure across portfolios.

What’s the role of asset allocation in a Living Annuity?

Your asset allocation determines your risk, return, and income potential. A well-diversified mix of equities, bonds, and offshore exposure helps balance growth and stability, essential for long-term success.

What’s the impact of retiring into a market downturn?

Retiring during a downturn can result in lower portfolio values and early capital erosion. This is called sequence of returns risk, and it’s a strong case for conservative drawdowns early in retirement.

Can I reinvest income from a Living Annuity tax-free?

No. Once income is withdrawn, it becomes personal income and is taxable. However, you can reinvest it in taxable or tax-free investment accounts.

How is inflation factored into my drawdown plan?

Inflation isn't automatically included. You must manually adjust your drawdown rate to match cost of living increases, or ensure your portfolio generates above-inflation returns.

What fees should I watch out for in a Living Annuity?

Watch for:

• Platform/admin fees

• Advisor fees

• Fund manager fees
  Combined, these can range from 1% to 3%+ annually and may erode returns over time.

Can I use a Living Annuity to fund medical expenses?

Yes, the income you draw can be used for any purpose, including medical aid premiums, treatments, or emergencies. Just ensure your drawdown remains sustainable.

Can I switch providers if I’m unhappy with performance?

Yes, you can transfer your annuity to a different provider via a Section 50 transfer, usually without incurring tax or penalties.

Do I need a financial advisor to manage my Living Annuity?

Not legally, but it’s strongly recommended—especially for those without investment knowledge. Advisors help with tax planning, portfolio selection, and sustainability strategies.

Are Living Annuities regulated by law?

Yes, Living Annuities in South Africa are governed by the Pension Funds Act and Taxation Laws Amendment Acts, with oversight from FSCA and SARS.

What are typical returns from a Living Annuity?

Returns vary by strategy, but balanced portfolios may deliver 6%–10% annually over the long term. Actual performance depends on your asset allocation and fees.

Can a Living Annuity be converted back to a Retirement Annuity?

No, this is not allowed. A Living Annuity is a post-retirement vehicle, while a Retirement Annuity is a pre-retirement savings product.

How do I increase income from my Living Annuity?

You can raise your drawdown rate during your annual review or adjust your investment mix to pursue higher returns—though this may increase risk.

Can I pause my Living Annuity during a market downturn?

No, withdrawals are legally required each year. The best option is to reduce your drawdown to 2.5% to minimize impact and preserve capital.

Is a Living Annuity affected by exchange rate fluctuations?

Yes—especially if you invest in offshore assets. A weaker rand can boost returns, while a stronger rand may reduce them. Diversification can help manage this.

What happens if I don’t adjust my drawdown annually?

If no changes are made during your review window, the provider will typically carry forward your current drawdown rate. You can only make changes once a year.

Can my spouse continue my Living Annuity if I pass away?

Yes, if named as a beneficiary, your spouse can continue to draw income or convert the annuity to one in their name.

Do I need to submit a tax return for a Living Annuity?

Yes, because your withdrawals are taxable income, they must be included in your annual SARS tax return.

How often should I review my Living Annuity portfolio?

At least once a year, during your drawdown review. More frequent reviews may be wise during volatile markets or major life changes.

Is there a minimum balance required to maintain a Living Annuity?

There’s no specific legal minimum, but if your balance falls below R125,000, you may withdraw it as a lump sum. Below that, managing fees and sustainability becomes impractical.

What investment options are available in a Living Annuity?

You can typically invest in a mix of unit trusts, balanced portfolios, local and offshore funds, and other instruments. Your choices depend on your provider’s platform offering.

How is tax calculated on Living Annuity withdrawals?

Withdrawals are taxed as income under the PAYE system, according to your personal income tax bracket. The higher your total income, the higher your tax rate.

Can I transfer a Life Annuity into a Living Annuity?

No, once you’ve purchased a Life Annuity, the decision is irreversible. You cannot transfer it back into a Living Annuity or access the capital.

Does my Living Annuity stop when I die?

No, it doesn’t end with your death. The remaining funds are transferred to your nominated beneficiaries, who can either continue the annuity or take a lump sum payout, depending on their needs and tax status.

What are the risks of a high drawdown rate?

A high drawdown rate can lead to capital depletion, increased tax liability, and may leave you without income later in retirement. Staying closer to the lower end of the 2.5%–17.5% range is generally safer.

Can I access my Living Annuity before age 55?

No, you can only start a Living Annuity from age 55 or older. Before then, your retirement savings remain in pre-retirement vehicles like pension or retirement annuity funds.

Is a Living Annuity suitable for early retirees?

Yes, it can be—but only if you start with sufficient capital, keep drawdowns low, and manage risk carefully. Early retirees must be especially cautious about longevity risk and market downturns.

What happens if I withdraw more than my investment earns?

If your withdrawals exceed investment returns, your capital will shrink over time. This can reduce future income and may cause your Living Annuity to run out sooner than expected.

How long will my Living Annuity last?

It depends on factors like your drawdown rate, investment performance, and inflation. Lower withdrawals and strong returns can make your annuity last decades, while aggressive drawdowns or market losses may shorten its lifespan.

Which is better, a Living Annuity or a Life Annuity?

A Living Annuity offers investment control and inheritance flexibility, but comes with market risk and no guaranteed income. A Life Annuity, by contrast, provides guaranteed income for life, but lacks flexibility and access to capital. The better choice depends on your risk appetite, longevity expectations, and income needs.

Can I withdraw my Living Annuity in South Africa?

Yes, you can withdraw income from your Living Annuity in South Africa within the regulated range of 2.5% to 17.5% of the annuity’s value annually. The income is paid into a South African bank account and is subject to income tax.

Can I pause my Living Annuity income for a year if I don’t need it?

No, legislation requires an annual withdrawal of at least 2.5% of the annuity’s value. The only workaround is to draw the minimum and reinvest it elsewhere if you don’t need the income.

What happens to my Living Annuity if I move abroad permanently?

You can continue receiving income into a South African bank account, and then transfer it offshore. If you become a tax non-resident, you may qualify for double tax agreement relief, depending on your new country of residence.

Can I name a trust as a beneficiary for my Living Annuity?

Yes, a trust can be nominated as a beneficiary, but it may have different tax implications and payout structures compared to individuals. Always consult with a tax or estate planning expert before naming a trust.

Are Living Annuities affected by interest rate changes?

Indirectly, yes. If your annuity includes fixed-income investments or bonds, changes in interest rates can affect their performance. Equity-heavy portfolios are less sensitive, but still impacted by macroeconomic shifts.

Can my Living Annuity income be adjusted for inflation annually?

No automatic inflation adjustment is made. You must manually increase your drawdown rate (within the 2.5%–17.5% range) during your annual review if you want your income to keep pace with inflation.

What documents are required to start a Living Annuity?

You'll typically need your ID document, proof of address, bank details and retirement fund documentation showing the lump sum available for conversion. Some providers may request tax clearance if you have offshore components.

How is interest earned inside my Living Annuity treated for tax purposes?

Interest, dividends, and capital gains within the annuity are not taxed. You only pay tax when making withdrawals, which are taxed as income.

Are there penalties for reducing my drawdown rate?

No, there are no penalties for reducing your drawdown rate. In fact, lowering your rate can extend the life of your capital and reduce tax liability. Changes are only allowed once per year, during your anniversary month.

How often can I change my fund allocation in a Living Annuity?

Most providers allow allocation changes anytime, although some may limit switches to a few times per year. There are no tax penalties for switching funds within the annuity.

Can I transfer a Living Annuity from a South African provider to an offshore one?

No, a Living Annuity must remain within the South African retirement framework. While you can invest offshore within it, the annuity product itself cannot be moved abroad.

Can I use my Living Annuity as collateral for a loan?

No, South African law prohibits using retirement income products, including Living Annuities, as collateral. The funds are protected from creditors, except under specific legal conditions like divorce orders or SARS debt.

What happens if my Living Annuity provider goes out of business?

Your funds are typically held in segregated investment accounts, so even if a provider fails, your assets remain intact. However, admin transitions may cause delays. Choose a reputable, regulated provider to minimize risk.

Do Living Annuities offer protection against currency devaluation?

Yes, if you allocate funds to offshore investments, your Living Annuity can act as a hedge against the weakening rand, providing currency diversification and potential long-term growth.

How do I know if my drawdown rate is sustainable?

A sustainable drawdown rate depends on your age, investment returns, and inflation. Generally, keeping your rate near 2.5%–5% helps preserve capital, but it’s wise to consult a financial advisor for a tailored plan.

Can I convert my Living Annuity into a Life Annuity later?

Yes, you can transfer your Living Annuity to a Life Annuity if you want to secure a guaranteed income. This is a one-way conversion, and once done, you lose access to your capital and investment flexibility.

What’s the difference between a Living Annuity and a Preservation Fund?

A Preservation Fund holds retirement savings before retirement, while a Living Annuity is used after retirement to draw income. You can’t make regular withdrawals from a preservation fund, but you must withdraw annually from a Living Annuity.

Can I choose different drawdown rates for each Living Annuity if I have more than one?

Yes, each Living Annuity is treated as a separate product, so you can set different drawdown rates for each, depending on your cash flow needs and investment strategy.

Can I split my Living Annuity income between multiple bank accounts?

No, providers generally require income to be paid into a single South African bank account in your name. You can, however, transfer funds after payout to other accounts manually.

What happens if I skip selecting a beneficiary for my Living Annuity?

If no beneficiary is nominated, your Living Annuity will become part of your deceased estate and be subject to your Will. This may cause delays and possible estate taxes, so it's best to keep your beneficiary nomination up to date.

Can I change my Living Annuity income frequency after starting it?

Yes, most providers allow you to change the payment frequency (monthly, quarterly, biannually, or annually), but only once a year—usually during the annual review period. Check with your provider for specific timing and notice requirements.

Are Living Annuities taxed differently from other income?

No, withdrawals from a Living Annuity are taxed as normal income under PAYE rules. The rate depends on your total annual income. However, the growth inside the annuity is tax-deferred, which helps compound returns over time.

Can I manage my own Living Annuity without a financial advisor?

Yes, you can manage your own Living Annuity, but it requires investment knowledge, tax awareness, and regular reviews. If you're unfamiliar with financial markets, consider partnering with a fee-based advisor to avoid costly mistakes.

Is a Living Annuity affected by inflation?

Yes, if your investments do not generate inflation-beating returns, your purchasing power will decrease over time. It’s important to choose a balanced or growth-oriented portfolio to help protect your income from erosion.

Can I reinvest Living Annuity income?

No, once income is withdrawn from your Living Annuity, it becomes personal income and is taxable. However, you can invest the income in other discretionary investments, though this won’t enjoy the same tax-deferred benefits.

What is the minimum investment for a Living Annuity?

The minimum investment amount varies by provider but is typically around R50,000 to R100,000. This is often the portion of your retirement fund that must be used to purchase an annuity upon retirement.

Are Living Annuities subject to estate duty?

No, the remaining capital in your Living Annuity is not subject to estate duty if you’ve named a beneficiary. However, if your beneficiary opts for a lump sum, it may be subject to income tax depending on their tax status.

Can I use a Living Annuity for offshore retirement?

Yes, you can invest in offshore funds within your Living Annuity for currency diversification, but the income must still be paid into a South African bank account. If you're retiring abroad, consult a tax professional about international tax implications.

Is income from a Living Annuity guaranteed?

No, unlike a Life Annuity, income from a Living Annuity is not guaranteed. It depends on the performance of your investments and your chosen drawdown rate. This flexibility also means your income could decrease if markets perform poorly.

Can I choose my own funds in a Living Annuity?

Yes, most providers allow you to choose from a range of unit trusts or managed portfolios. You can also allocate funds between local and offshore investments, depending on your risk profile and return expectations.

What’s the best age to start a Living Annuity?

You can start a Living Annuity from age 55, but the ideal timing depends on your retirement needs, income sources, and financial goals. Starting earlier gives more flexibility, but requires careful withdrawal planning to avoid depleting your funds too soon.

Can I stop or exit a Living Annuity?

You cannot cancel or cash out a Living Annuity except under limited circumstances. If your balance falls below R125,000, you may withdraw it as a lump sum. Otherwise, you're required to continue withdrawals within the 2.5%–17.5% range. You can, however, transfer the annuity to another provider or adjust your investment strategy within the same policy.

How do I reduce the risk in my Living Annuity?

To manage risk, maintain a diversified investment portfolio that includes a mix of equities, bonds, and possibly offshore assets. Keep your drawdown rate on the lower end (closer to 2.5%) to allow capital to grow. Regularly review your investment strategy and consult a financial advisor to adjust based on market trends and personal goals.

Can I change my Living Annuity provider anytime?

Yes, you can perform a Section 50 transfer to move your Living Annuity to another provider. This allows you to seek lower fees, better performance, or broader investment options. Transfers are tax-free if done correctly, but you should review the new provider’s features and costs before switching.

Can I add funds to an existing Living Annuity?

No, you cannot top up an existing Living Annuity with new retirement funds. Instead, you’ll need to start a new Living Annuity policy for any additional retirement money you receive. Each annuity will have its own drawdown rules, investment strategy, and provider terms.

What happens to a Living Annuity on death?

When you die, your Living Annuity transfers to your nominated beneficiaries. They can either continue the annuity or take a lump sum payout, which will be subject to tax. If you don’t name any beneficiaries, or if they can’t be located, the remaining funds will be included in your deceased estate and distributed according to your Will. Keeping beneficiary details updated ensures smoother processing and avoids legal complications.

Can money be lost in an annuity?

Yes, especially in a Living Annuity. Because your funds remain invested in the market, they are subject to volatility and potential losses. Poor performance, high fees, or unsustainable drawdowns can cause your capital to decline. Unlike Life Annuities, there is no protection against market downturns, so prudent investing and portfolio diversification are essential.

How much is a R100,000 annuity per month?

If you invest R100,000 in a Living Annuity and select the minimum drawdown rate of 2.5%, your monthly income would be approximately R208.33 before tax. If you opt for the maximum rate of 17.5%, you’d receive about R1,458.33 per month. These values are subject to tax and can affect the longevity of your investment. Choosing a sustainable drawdown rate is crucial to ensure your income lasts through retirement.

What are the disadvantages of a Living Annuity?

Living Annuities carry investment risks. Your returns are not guaranteed and will fluctuate with market performance. If markets decline or returns are low, your capital may shrink and fail to keep up with inflation. This reduces the income you can sustainably withdraw. There’s also no guaranteed lifetime income, so poor decisions or high withdrawals can result in your savings running out. A Living Annuity requires active management and financial knowledge.

How does market volatility affect my Living Annuity?

Because your funds remain invested, market volatility directly impacts your annuity’s performance. During downturns, your capital may shrink, which can reduce sustainable income. Diversification and a balanced portfolio are key to managing this risk.

Can I combine Living Annuities from multiple providers into one?

Yes, you can consolidate Living Annuities by transferring them into a single provider. This can simplify administration and reduce fees, but it's important to compare the new provider’s costs and investment options first.

Can I suspend or pause income withdrawals?

No, income withdrawals are mandatory each year. However, you can adjust your drawdown to the minimum 2.5% annually to preserve capital if you don’t need the income.

What role does risk tolerance play in a Living Annuity?

Risk tolerance is crucial. A more conservative investor may prefer income-focused portfolios with lower volatility, while growth-focused investors might allocate more to equities or offshore markets. Your drawdown rate and investment mix should align with your risk profile.

Can I switch funds within my Living Annuity?

Yes, you can usually switch between unit trusts or portfolios within your Living Annuity without triggering capital gains tax, since the investment remains within a tax-sheltered structure.

What fees are charged on a Living Annuity?

Typical fees may include:

• Platform/admin fees

• Financial advisor fees

• Fund management fees

These are usually expressed as a percentage of your assets. It’s important to compare providers and understand how fees impact long-term growth.

Can I receive my Living Annuity income monthly?

Yes, Living Annuity income can be paid out:

• Monthly

• Quarterly

• Biannually

• Annually

You select the payment frequency that suits your income needs.

What happens to my Living Annuity if I retire early?

If you retire early (before 65), you can still convert your retirement savings into a Living Annuity from age 55. Your drawdown and tax obligations will apply as usual, but early retirement may affect how long your capital lasts.

When can I change my investment allocation?

Most providers allow you to change your investment allocation at any time, giving you the flexibility to respond to market conditions or personal goals. However, changes may take a few business days to process.

Is a Living Annuity a Good Idea?

A Living Annuity is ideal if you want flexibility, inheritance benefits, and investment control. However, you must carefully manage withdrawals and market risks.

Can I Move My Living Annuity Offshore?

Yes, you can allocate your Living Annuity investments offshore, benefiting from international diversification and potential currency hedging.

What are the Rules for a Living Annuity?

Living annuities are subject to several key rules:

1. Investment Options: You can choose how to invest your funds, including various asset classes like stocks and bonds.
2. Withdrawal Rates: You must withdraw a minimum of 2.5% to 17.5% of your investment annually, depending on your age.
3. No Guaranteed Income: Unlike traditional annuities, there is no fixed income; withdrawals depend on investment performance.
4. Taxation: Withdrawals are subject to income tax, but investment growth is tax-deferred.
5. Beneficiaries: You can designate beneficiaries to inherit any remaining funds upon your death.
6. For personalized advice, consult a financial advisor.

How Does a Living Annuity Compare to Other Retirement Income Options?

Compared to Life Annuities, a Living Annuity offers:

• More flexibility in withdrawals and investments
• Inheritance benefits, as funds go to beneficiaries
• Market risk exposure, meaning returns are not guaranteed

Choosing between a Living Annuity, Life Annuity, or Pension Fund depends on your income needs, risk tolerance, and long-term financial goals.

What Happens If I Become a Non-Resident for Tax Purposes?

If you emigrate and become a non-resident, your Living Annuity income will still be subject to South African tax, but you may apply for tax relief depending on your new tax residency.

Do Living Annuities Protect Against Inflation?

A well-managed Living Annuity with a balanced investment portfolio can help protect against inflation, ensuring your income retains purchasing power over time.

Can I Change My Living Annuity Withdrawal Rate?

Yes, you can adjust your drawdown rate annually, within the 2.5% – 17.5% range, depending on your income needs and investment performance.

What Happens If My Living Annuity Runs Out?

If your Living Annuity depletes due to high withdrawals or poor performance, there will be no further income payments. This is why sustainable withdrawal rates and strong investment strategies are essential.

How Do I Choose the Right Living Annuity Provider?

Consider these factors when selecting a Living Annuity provider:

• Investment options: Ensure access to a diversified portfolio
• Fees and costs: Compare administration and investment fees
• Flexibility: Ability to adjust withdrawals (drawdowns)
• Performance history: Look at long-term growth trends

Does a Living Annuity Have an Expiry Date?

No, a Living Annuity does not expire. It lasts as long as there is capital in the investment. However, if withdrawals exceed growth, funds may deplete over time.

Can I Transfer My Living Annuity to Another Provider?

Yes, you can transfer your Living Annuity to another provider if you find a better investment option or lower fees. This ensures flexibility and the ability to optimize your retirement income.

How Does a Living Annuity Work in South Africa?

After retiring, you transfer your retirement savings (from a Pension Fund, Provident Fund, or Retirement Annuity) into a Living Annuity. You then:

• Choose a drawdown rate (2.5% to 17.5%).
• Select investment options, including local and offshore funds.
• Withdraw an income, while keeping your capital invested for growth.

How are Living Annuities Taxed in South Africa?

Living Annuities in South Africa are taxed as income, meaning any withdrawals you make are subject to PAYE (Pay-As-You-Earn) tax based on your personal income tax bracket.

Key Tax Considerations:

✔ Withdrawals are taxed at your marginal income tax rate as per SARS tax tables.
✔ No tax on capital growth, interest, or dividends within the Living Annuity.
✔ No capital gains tax (CGT) on investment returns.
✔ No estate duty—your remaining capital goes to your beneficiaries tax-free.
✔ Beneficiaries may pay tax if they take a lump sum withdrawal.

How Tax Works on Withdrawals:

• If you withdraw a small amount, your tax rate will be lower.
• If you withdraw a large amount, it could push you into a higher tax bracket.

To minimize tax, consider structuring withdrawals to keep your total taxable income within a lower tax bracket.

What is the Difference Between a Pension and a Living Annuity?

• Pension Annuity: Pays a fixed, guaranteed income for life but has no flexibility.
• Living Annuity: Lets you control your withdrawals and investments, but your income is subject to market fluctuations.

What is the Difference Between a Life Annuity and a Living Annuity?

• Life Annuity: Pays a guaranteed income for life, but you lose access to your capital.
• Living Annuity: Offers flexibility and inheritance benefits, but your funds can deplete if mismanaged.

What is the Difference Between a Retirement Annuity and a Living Annuity?

• A Retirement Annuity (RA) is used to save for retirement and cannot be accessed before age 55.
• A Living Annuity is what you convert your RA into when you retire, allowing you to withdraw income.

How do Living Annuities Withdrawals (drawdowns) Work?

• You select a drawdown rate (adjustable once per year).
• Withdrawals are paid monthly, quarterly, biannually, or annually.
• If your drawdown rate is too high, you risk depleting your capital too soon.

What is the Drawdown Rate for Living Annuities in South Africa?

• The drawdown rate is between 2.5% and 17.5% per year.
• Choosing a lower rate allows more capital growth, while a higher rate may lead to faster depletion.

In Short, What are Living Annuities?

• Withdrawals must be between 2.5% and 17.5% of your investment annually.
• Your withdrawals are taxed as income.
• No estate duty applies, but your beneficiaries may pay tax on withdrawals.
• You cannot make lump sum withdrawals, except under specific conditions.

How are Living Annuities Taxed in South Africa?

• Withdrawals are taxed as income, based on your personal tax bracket.
• No tax on capital growth, interest, or dividends within the annuity.
• No estate duty, but beneficiaries may pay tax when withdrawing funds.

How can I Boost the Performance of my Living Annuity?

• Reduce withdrawals to allow more capital growth.
• Invest offshore to hedge against local currency risks.
• Diversify your portfolio to balance risk and returns.

How do I Invest my Money with a Living Annuity?

• Choose an investment provider and asset allocation.
• Decide on a drawdown rate that balances income and growth.
• Diversify between equities, bonds, and offshore funds to reduce risk.

What is the Disadvantage of a Living Annuity?

• Market risk—your investments may underperform.
• No guaranteed income—funds may run out if mismanaged.
• Requires financial knowledge—poor investment choices can affect retirement security.

How does Emigration affect my Living Annuity?

• If you emigrate, you cannot withdraw your Living Annuity as a lump sum.
• Your withdrawals will continue, and payments must be made into a South African bank account.

What Happens to a Living Annuity on Death?

• The remaining funds go to your nominated beneficiaries.
• Beneficiaries can continue the annuity or take a lump sum payout (subject to tax).
• If no beneficiaries are named, the annuity is paid into your estate.

How does Offshore Investing work within a Living Annuity?

• You can allocate up to 100% offshore, depending on your investment provider.
• Offshore investments provide global diversification and currency hedging benefits.

Can I Cash Out my Living Annuity?

• No, you cannot withdraw the full amount in cash.
• If your Living Annuity drops below R125,000, you can withdraw it as a lump sum.