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Retirement

Living annuities and guaranteed annuities

A living annuity keeps your capital invested and pays a drawdown you choose, inside the rules. A guaranteed annuity pays an income the insurer promises and usually takes the capital.

Reviewed 29 October 2026 by the WiT Money editorial team. This is general information, not a recommendation from a named adviser.

Key points

  • Investment returns on a living annuity are not guaranteed. The capital can be used up.
  • For a living annuity concluded on or after 21 February 2007, Government Notice 290 of 11 March 2009 sets the annual drawdown at 2.5% to 17.5% of the assets. A contract concluded earlier can follow a different band. The range is not a recommended income.
  • A guaranteed annuity is a different contract. Do not compare them on the first month's rand alone.

With a living annuity you stay invested. Each year you draw a percentage of the balance. If markets fall, or the drawdown is high, the income and the capital both shrink. Fees come off as well. The drawdown calculator on this site runs a constant return you type. Real markets do not do that.

A guaranteed life annuity pays an agreed income for life, or for a term the policy states. You generally give up the capital. Inflation protection, a spouse's income and a guarantee period are features you pay for in a lower starting income. A higher starting income with no increase will buy less groceries later.

An illustration

R2 million drawn at 5% is R100 000 in the first year before fees and tax, if the percentage applies to the opening balance. If the return does not keep up, next year's rand can be lower even at the same percentage. Type your own figures. Do not treat R2 million as a recommendation.

Fees and inflation

Ask for the charge on the annuity and on the underlying funds. A 1% annual fee on a living annuity is not small over twenty years. The inflation calculator shows what a fixed rand amount buys later, at a rate you type. It is not a Statistics South Africa forecast.

Questions readers ask

Which one is safer?

A guarantee moves investment risk to the insurer, on the policy's terms, including the insurer's ability to pay. A living annuity leaves the risk with you. Safer is the wrong word until you know which risk you mean.

Related

Sources

Page updated 29 October 2026. A source date is the day WiT Money checked that page, not a promise the institution has not changed it since.