What options do you have at retirement?
The source of retirement savings and the rules that apply to that retirement fund determine your retirement options.
We believe in the value of sound financial advice. At retirement, clients must make informed decisions about their options. Your financial adviser is best equipped to guide you through this process to achieve your goals, and we recommend that you get in touch with your adviser to plan for your retirement together.
South African retirement funds must give their members access to retirement benefit counselling when they are close to retirement and at retirement. Retirement benefit counselling provides you with information about the options available. However, it is not a replacement for financial advice based on your personal circumstances.
Your cash and annuity options at retirement
For the savings component, you can:
- Take the full or any portion in cash at retirement.
- Use the rest to purchase an annuity to pay you an income during retirement.
For the vested component, you can:
- Take up to the full amount in cash at retirement of the T-day vested benefit.
- Take at most one-third in cash at retirement of the T-day non-vested benefit.
- Use the rest to purchase an annuity to pay you an income during retirement.
For the retirement component, you can:
- Take at most one-third in cash at retirement.
- Use the rest to purchase an annuity to pay you an income during retirement.
Your benefit statement will show your savings, retirement and vested component
(split between T-day-vested and T-day non-vested benefits).
Any amount you take in cash at retirement will be taxed according to the retirement
fund lump sum tax table, and your income from your chosen annuity will be taxed as
ordinary income.
What to consider when choosing an annuity
You can select a combination of or types of annuities if you use at least R165 000 for each one. There is no limit on the number of annuities you can purchase. Therefore, you can choose a life and living annuity from different registered insurers.
When deciding on the type of annuity, you must consider how much flexibility and income certainty you need. Your risk appetite, health, and other sources of income are also important factors.
Broadly speaking, there are two categories of annuities, each with its key features. A living annuity offers flexibility to decide how to invest your retirement savings and how much income you receive within certain limits.
A life annuity guarantees you an income for the rest of your life, and you don't make any investment decisions.
Compare annuity options for retirement
When planning your retirement income, it’s important to understand the differences between living and life annuities to choose the option that best suits your needs.
Is your income guaranteed for the rest of your life?
Living annuity
Life (guaranteed) annuity
Living annuity
Life (guaranteed) annuity
Yes.
Can you choose your monthly income amount?
Living annuity
Life (guaranteed) annuity
Living annuity
Life (guaranteed) annuity
No, the insurance company will offer you a starting income amount based on various factors and your requirements.
Can you decide how you would like to invest your retirement savings?
Living annuity
Life (guaranteed) annuity
Living annuity
Life (guaranteed) annuity
No, the life insurer will decide how to invest to provide you with your income.
Can you adjust your income every year?
Living annuity
Life (guaranteed) annuity
Living annuity
Life (guaranteed) annuity
No, the insurance company provides you with a range of income options, which may include a yearly increase option.
Can your beneficiaries receive the rest of your money when you die?
Living annuity
Life (guaranteed) annuity
Living annuity
Life (guaranteed) annuity
Yes, but your beneficiaries will only receive the remaining income payments if you die within the guarantee term you chose at the start of the annuity.
What is a guarantee term?
Living annuity
Life (guaranteed) annuity
Living annuity
Life (guaranteed) annuity
A set term during which your income payments will still be paid to your beneficiaries.
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