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What is a Living Annuity?

What is a Living Annuity?

It’s a financial product that pays you a regular income when you choose to retire. When you retire from your Pension fund or Retirement Annuity, a percentage is required to be placed in your Living Annuity to replace your income.

Income

Once your funds are in your Living Annuity, you can choose to withdraw between 2.5% and 17.5% per year. This can be paid monthly or annually. Your income is subject to tax. The amount you withdraw is an important decision to make, as if you withdraw too much, your capital will deplete quickly. This will lead to your income being reduced the following year. There is a fine balance between how you invest your capital versus how much you withdraw. Careful planning is required here.

Investment

With a Living Annuity, you can choose how you would like to invest your funds, there are no constraints as with other retirement funds. Once you open your Living Annuity account on EasyEquities, all local investment funds will be available for you to invest in. This includes shares, ETF’s, unit trusts and bundles.

Rules

Living Annuities can only accept funds from a retirement fund or another Living Annuity. You can transfer your Living Annuity from one provider to another. Once a year you will be allowed to change the income percentage or amount that you are withdrawing. This date is set at the inception date. You cannot change the amount you are withdrawing within that year.

Beneficiaries

You are required to nominate beneficiaries on your Living Annuity. One of the many benefits of the Living Annuity is that the proceeds can be transferred to your heirs. Your beneficiary can choose to access the cash amount which will be subject to tax, or they can choose to continue receiving the income.

Tax

When you retire from your retirement funds, there is no tax payable on the amount you transfer into your Living Annuity. The tax you pay on your income is withheld by EasyEquities and paid across to SARS on your behalf.

Costs

Please refer to our cost profile for the costs associated with your Living Annuity.

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