Living annuity assets climb by R911bn as retirees curb their spending

Living annuity assets have surged R911-billion as retired persons become more cautious about drawing income from their investments.

A living annuity is a market-linked retirement product that pays a regular income from invested savings while allowing the investor to control investment choices and drawdown rates.

The Association for Savings and Investment South Africa (ASISA) showed in their latest figures that the growth accelerated in 2025 with new money flowing into living annuities reaching a record R104-billion, increasing from R89-billion in 2024. The total assets under management increased from R781-billion to R911-billion.

The number of living annuities more than doubled from 278 000 in 2011 to 579 205 at the end of 2025, while assets under management increased almost sixfold from R155-billion to R911-billion.

While more retirement capital is moving into living annuities, retirees have not responded to rising living costs by drawing significantly more from their savings. Instead, the average annual drawdown rate remained relatively low at 6.6% in 2025, compared with 7% when ASISA first started tracking the market in 2011.

Jaco van Tonder, deputy chair of the ASISA Marketing and Distribution Board Committee, said the decline in drawdown rates suggested retirees were prioritising the preservation of their capital.

“Since South Africans have faced rising living costs for several years, this suggests living annuity investors opted to preserve capital by lowering spending rather than increasing income by selecting higher drawdown rates,” Van Tonder explains.

The trend is significant because living annuities do not provide a guaranteed income. Retirees choose how much to withdraw each year, within the permitted range of 2.5% to 17.5%, leaving the sustainability of their income dependent on investment performance and how long they live.

Van Tonder said the level of income selected, investment performance and the lifespan of the retiree are the three key factors determining how long retirement capital can continue to provide an income.

He said retirees need to ensure their withdrawals do not consistently exceed the real returns generated by their investment portfolios, as this could erode capital and leave them with less money to fund their later years.

According to ASISA, annual drawdowns of between 4% and 5% during the first decade of retirement, and below 8% in later retirement years, are generally regarded as prudent.

The data suggests many retirees are already operating within these more conservative levels.

At the end of 2025, 45% of living annuity assets, worth R410.2-billion, were subject to annual drawdown rates between 2.5% and 5%. A further 27.3%, or R248.9-billion, was in the 5% to 7.5% band.

“This means that almost three quarters of living annuity assets are subjected to annual drawdown rates of 7.5% and lower,” said van Tonder.