As many South Africans approach retirement, one of the most important decisions they face is how to turn their retirement savings into a dependable income.
Whether your savings come from a Pension Fund, Provident Fund, Preservation Fund or Retirement Annuity, one of the most flexible post-retirement solutions available is the Living Annuity.
But what exactly is it? And how does it work?
What is a Living Annuity?
A Living Annuity is a retirement income product that you buy with your retirement savings when you retire. It lets you draw a regular income, while the rest of your capital stays invested in financial markets.
Unlike a guaranteed or life annuity, the income isn’t fixed and your money doesn’t go to an insurer. You stay in control.
Key Features
- Drawdown flexibility: You choose how much to withdraw each year (between 2.5% and 17.5%).
- Investment choice: You decide where the money is invested, including local and offshore funds.
- No income guarantee: Your withdrawals depend on how well your investments perform.
- Estate planning: Any money left when you pass away goes to your beneficiaries.
Benefits
1. Flexibility You can increase or decrease your income each year depending on your needs. This is especially helpful if your expenses change or if markets have been volatile and you want to protect your capital.
2. Investment Control You choose how your money is invested. If you prefer a conservative mix, you can lean into cash and bonds. If you’re aiming for long-term growth, you can allocate more to equities and offshore exposure.
3. Legacy Value Any unused capital can be left to your beneficiaries. This is very different from a life annuity, where your money typically stays with the insurer after death.
4. Potential to Beat Inflation Because your money stays invested, you have the chance to earn returns that keep up with or outpace inflation over the long term.
Risks to Know
1. Market Volatility Your investment value can go up and down. If markets drop early in retirement, it could affect how long your savings last.
2. No Guaranteed Income Unlike a life annuity, your income isn’t fixed. Poor market returns or high drawdowns can reduce your income in future years.
3. Longevity Risk If you live longer than expected and withdraw too much too early, your money might run out.
4. You Manage It (or Need Help) You or your advisor must actively manage your investment strategy and drawdown to ensure sustainability.
Is a Living Annuity Right for You?
It depends on your situation. A Living Annuity suits those who:
- Want more control over their money
- Are comfortable with some market risk
- Have other income sources or a large enough capital base
- Want to leave an inheritance
However, if you value predictability and don’t want to worry about investment markets, a Life Annuity might be a better fit.
Try Our Living Annuity Calculator
Curious about how much income your retirement savings could generate? Use our Living Annuity Calculator to model your drawdown, income and investment growth over time.
Explore Quick Q&As
Still have questions? Check out our Living Annuity FAQs — over 100 short, plain-language answers to the most common questions from South Africans nearing or already in retirement.
In Summary
A Living Annuity gives retirees control, flexibility and the chance for investment growth—but it also requires active decisions and carries some risk. It’s not a one-size-fits-all solution, but for the right investor, it can offer freedom and long-term value.
Before making any decisions, it’s best to speak to a qualified financial adviser who can help you balance your income needs with long-term sustainability — and get a free comparison report to see how your options stack up.
