Why settle on one solution when you can have the best of both?

The decision between a life annuity and living annuity is a big one as you step into retirement. 

This choice will shape your financial well-being throughout your retirement, and it is important for you to know the difference between these solutions. 

• Click here to learn how Glacier can give you the best value from both life and living annuities.

Each option offers different benefits, risks, and there are some trade-offs – and the right choice will depend on your unique needs, goals, and financial priorities. 

Also, a combination of both solutions supports optimal income in retirement, the importance of which cannot be overstated.

But first, let’s explore each option in detail.

Life annuity – a guaranteed income for life 

A life annuity offers the security of a guaranteed monthly income for the rest of your life. 

It’s a “set-and-forget” solution, where the insurer takes on the longevity risk, which means you cannot outlive your income. 

This makes it an attractive choice for those who value certainty and financial stability.

Key benefits:

• It offers a guaranteed income for life, unaffected by market fluctuations.
• You’ll have protection against inflation if you select an income escalation option.
• The solution is backed by long-term bonds, offering attractive rates in a high-bond-yield environment.

Additional options include:

• Adding a second life insured to whom the income continues to be paid at your death
• Choosing a guaranteed term during which the income continues to be paid in the event of your death.

The limitations of a life annuity are:

• There is no flexibility in this solution – once the annuity is set up, it cannot be changed.
• There’ll be no capital payout at death. However, if a guaranteed term or second life insured is selected, income can continue to your loved ones. A lump sum is available if you choose optional life cover.
• The solution only offers inflation protection if, at inception, you selected annual income escalation. If not, your purchasing power may decline over time.

Living annuity – flexibility and control

A living annuity provides retirees with greater control over their investments and income. 

You choose how your funds are invested and how much income to draw each year (naturally, within regulatory limits). 

It also allows you to leave any remaining capital to your beneficiaries.

Key benefits:

• You have income flexibility – you can adjust your retirement income annually based on your needs.
• You have investment choice – select and switch between underlying funds as you need to.
• The solution offers legacy planning – the remaining capital after your death, is passed to your beneficiaries.
• There is potential for capital growth through market exposure.

The limitations of a living annuity are:

• Your income is not guaranteed for life – you bear the risk of outliving your savings.
• Your income is affected by market performance and inflation.
• This solution requires active management and ongoing financial advice.
• There is the risk of capital erosion if drawdowns are too high or the underlying investments underperform.

A combined approach provides you with the best of both worlds

Blending a life annuity with a living annuity offers a powerful solution that balances certainty and flexibility.

What you’ll achieve by combining these two solutions to create your retirement income: 

Stability – you’ll have a guaranteed income from the life annuity component.

Flexibility and growth – you’ll be able to adjust your income and there is potential for capital growth from the living annuity component.

Protection against longevity risk (the risk of your money running out), as the guaranteed income continues for life.

Legacy opportunities, with any remaining funds in the living annuity passing to your beneficiaries.

Options to protect loved ones through joint-life coverage or guaranteed income payment terms.

There is no one-size-fits-all solution

When it comes to retirement income planning, you, your needs and circumstances need to be at the centre of your chosen solution. 

Each option – life annuity, living annuity, or a combination of the two – offers distinct advantages, 

Therefore, it’s crucial to work with an authorised financial adviser who can help you build a strategy that balances income certainty, investment flexibility, longevity protection and legacy planning.

Find out more about Glacier’s retirement income solutions and speak an authorised financial adviser to help make these important decisions. 

Your retirement is your future. Make sure it’s well-planned, well-protected, and aligned with your life goals

• Click here to learn how Glacier can give you the best value from both life and living annuities.

About Glacier by Sanlam

Glacier by Sanlam is your trusted partner in unlocking infinite investment opportunities. 

As the largest linked investment service provider, we have led the way in meeting the diverse needs of South Africans since 1997. 

Our extensive range of local and international solutions empowers investors to create, grow, and preserve their wealth. 

Through innovative products and expert advice, we offer infinite opportunity to achieve financial success.

Glacier Financial Solutions (Pty) Ltd is a licensed financial services provider.

Sanlam Life Insurance Ltd is a licensed life insurer, financial services and registered credit provider (NCRCP43).