Living annuities explained

How it works

At retirement, the part of your savings you don’t take as cash has to buy an annuity. With a living annuity, the money stays invested in funds you choose, and each year you draw an income of between 2,5% and 17,5% of its value. You can change the rate once a year, on the anniversary.

Living annuity or guaranteed annuity?

A guaranteed (life) annuity pays a set income for as long as you live, often increasing each year, and the insurer carries the investment risk. A living annuity gives you control and flexibility, and what is left goes to your beneficiaries when you die, but you carry the risk that markets fall or that you live longer than the money lasts. Some people split their savings between the two.

An example

R 3 million at a 5% drawdown pays R 150 000 in the first year, or R 12 500 a month before tax. If the investments grow 9% a year after fees and inflation is 5%, the income rises in rand terms but buys less each year, because the drawdown is more than the real return of about 4%.

Tax

The income is taxed like a salary, with PAYE deducted by the provider. Growth inside the living annuity is not taxed, and no capital gains tax applies when the funds are switched.

Small living annuities

If a living annuity is worth R 150 000 or less (from 1 March 2026, counting all your living annuities with the same provider), you may take it all in cash. Tax still applies, so ask the provider for the figure.

See how long your income could last with the living annuity calculator.