Living Annuity or Life Annuity: What’s the difference?

During one’s working life the focus is generally on saving towards our retirement. When retirement reaches and your retirement provision now needs to supply your retirement income, there are two types of products through which this is done. Retirees tend to opt for living annuities because of specific benefits they offer, however there are also guaranteed options which offer their own unique benefits. Understanding these options and choosing the right solution can go a long way in helping to achieve a sustainable income in retirement.

A Life Annuity vs a Conventional Living Annuity

A Life Annuity pays a guaranteed income for life, but it does not offer the same flexibility or growth potential as a Living Annuity. A retiree cannot choose his/her income or the income frequency. A Living Annuity, on the other hand, is a market-linked annuity that does not offer any guarantees. The value of a living annuity will fluctuate, depending on the performance of the underlying investment options. A retiree is allowed to choose the level of income and the income frequency (within the available options).

The table below sets out more differences between the two types of annuities.

If you would like to find out more about these options, please contact our Risk and Wealth Team on 011 778 9300.

This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted. (E&OE)