Living annuity drawdown calculator

How a living annuity pays you

Each year you choose an income of between 2.5% and 17.5% of your capital, and you can change the rate once a year on the policy anniversary. The rest stays invested. If the income you need grows faster than your capital, the rate rises; once it reaches 17.5%, your income can only fall as the capital shrinks.

The calculator sets each year’s income as a rate of the capital at the start of that year, pays it monthly, and grows the rest at the return you enter. The chart shows the income in today’s money, so a flat line means your buying power holds and a falling line means it shrinks.

If the total of all your living annuities with one insurer or fund falls below R 150 000, you can take it all in cash. A small policy can’t be cashed in on its own while your other policies with the same insurer or fund take the total above that. Retirement in South Africa: Income, Tax and Your Estate compares living and guaranteed annuities.

Regulation 28

Regulation 28 of the Pension Funds Act limits how retirement funds invest, for example how much they can hold in shares and offshore. It applies to retirement annuities and to pension, provident and preservation funds. The TRG Income, Stable, Moderate and Balanced funds comply with it; the TRG Flexible Fund does not.

Living annuities aren’t bound by Regulation 28, so every fund in the list is open to them.

What the result leaves out

• Income tax on the annuity income, which is taxed like a salary.

• The ups and downs of real markets. The calculator uses the same return every year; a fall early in retirement shortens how long the income lasts.

• Other income, such as a guaranteed annuity, rental or investments outside the living annuity.

A sustainable drawdown rate depends on how your capital is invested, your other income and how long you live, so treat the result as a starting point for a conversation, not a recommendation. Past investment performance is not necessarily indicative of future performance. Projections are based on assumptions that may not materialise. The value of investments may go down as well as up. The information on this website is general and should not be seen as financial advice or a recommendation. We trust our sources but can’t guarantee absolute accuracy or completeness. Talk to a TRG adviser about your own circumstances.