How to build a long-term retirement annuity habit

Many investors understand the importance of having and investing in a retirement annuity, but many still struggle with consistency and discipline when it comes to actually investing in it. It can be easy to get your retirement annuity started, but it is often harder to stay disciplined when it comes to consistently investing in it.

Your retirement annuity is a long-term investment savings product that can potentially grow and compound when invested consistently over time. By focusing on a disciplined long-term investment approach, your retirement annuity can potentially improve your long-term retirement outcomes. In this article, we will take a closer look at how to build a retirement annuity habit and the benefits of doing so. We’ll also cover the importance of asset allocation, fees and investment strategy.

What is a retirement annuity?

A retirement annuity (RA) is a long-term investment savings vehicle that allows you to save for your retirement years while also taking advantage of the attractive tax benefits on offer. Contributions to your RA are tax-deductible up to the stipulated annual limits. As of the 1st of March 2026, these are R430,000 or 27.5% of your salary. Growth within your retirement annuity is also tax-free, which allows more of your returns to be reinvested and potentially grow and compound over time.

You can make regular monthly contributions to your retirement annuity via a debit order, or you may prefer to contribute a lump sum as and when you have money available. This flexibility may also suit self-employed individuals who do not receive a regular income and may not have a company pension or a provident fund. Upon retirement at age 55, you can transfer your RA to an annuity; this may be either a life or a living annuity, and the annuity will provide you with an income for your retirement years.

Why consistency matters more than timing

Trying to time the market can be a very difficult task, even for the most experienced professionals. It can be easy to get things wrong. A better approach may be to focus on starting early and then consistently investing. The time that you spend in the market can potentially yield the best results over time. The importance of compound growth should also not be forgotten. Compound growth is another powerful tool for an investor. This is when you see both your initial amount and your returns growing exponentially over time. Consistent investing allows your capital to move through economic cycles and potentially grow over time.

Common barriers to building a retirement annuity habit

There can be numerous reasons why it can be tricky as an investor to get the retirement annuity habit going consistently. Let’s have a look at some of the barriers that you may encounter:

• You may have an irregular income: Some months you may earn more than others, and other months you may not earn much at all. For this reason, it can be difficult to put in place a regular debit order.
• You may not be earning enough money: You might feel that you do not yet earn enough money, and you have certain expenses which need to be covered, so your available cash for consistent investing is limited.
• You have not considered the long-term: You haven’t done much financial planning, and putting money away for the retirement years has not been a big consideration.
• You’ve been scared by market volatility: It could also be a situation where you decide to stop your RA contributions during times of market volatility instead of continuing with contributions and consistent investing.

How to build a strong RA habit

Let’s now have a look at a practical, step-by-step guide that you may wish to implement in order to help you build a consistent and disciplined approach to your investing.

• Start early: It’s important to start early, allowing you to take advantage of compound growth, even if your contributions are small. You will need to check the investment minimums with your service provider.
• Set up a debit order: Setting up a debit order to automate the contribution process can help keep you contributing consistently.
• Adjust your contributions over time: Make sure to increase your contributions as your salary increases, be that in the form of a debit order or a lump sum contribution.
• Do not let market volatility scare you: Avoid stopping contributions during times of market volatility. Continue with your contributions and remain focused on your long-term goals and financial plan.

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Understanding the Two-Pot Retirement System

The Two-Pot Retirement System was implemented in September 2024 in South Africa. This has changed the way that both contributions and withdrawals to and from retirement products are now dealt with in South Africa. With the implementation of this new system, you will see that all contributions to retirement products are now separated between two pots. Namely, a ‘retirement pot’ and a ‘savings pot’. There is also a third pot, which is called the ‘vested pot’, which remains governed by the old rules that were in place prior to the Two-Pot Retirement System being implemented in September 2024.

Withdrawals from the savings pot are allowed as long as you adhere to the stipulated rules. Withdrawals may be done once per year, for a minimum amount of R2,000. These withdrawals are taxed at your marginal tax rate, and there is also an administration fee. The savings pot should be kept for emergencies, but ideally, your savings should remain invested. Any contributions to your retirement annuity will be split between the retirement and savings pots. One-third of contributions will be invested in the savings pot, and two-thirds will be allocated to the retirement pot. The retirement pot can only be accessed upon retirement, at which point it will be used to purchase a life or living annuity. Please consult the latest FSCA guidance for the most up-to-date information on the Two-Pot Retirement System.

The role of asset allocation in long-term discipline

Your asset allocation will play an important role in the long-term performance of your RA. Asset allocation plays the biggest role in the performance of your retirement annuity, accounting for over 90% of returns, as seminal research from Brinson, Singer and Beebower shows.

10X gives you the freedom to adjust your underlying portfolio by giving you the freedom to choose from a selection of carefully curated investment funds, each with a different mix of assets and geared towards different investor profiles. Your asset allocation refers to the mix of equities, real estate, bonds and cash that you invest your savings in.

Equities may produce the best returns in the long term while also being the most volatile of the asset classes. Equities have historically produced returns above inflation, by around 7% annually over the long term (based on JSE All Share Index performance versus CPI from 1960-2020); however, past performance does not guarantee future results.

Real estate may also produce some solid returns, along with being a good hedge against inflation. Bonds will add some stability to your portfolio, but returns may be lower. This doesn’t mean bonds will never outperform expectations, merely that it is seen as a more conservative option. Cash will produce the lowest returns of all the asset classes, while also being the most stable of the asset classes.

Generally, you should avoid being too conservative when it comes to your asset allocation in order to pursue growth over time. You would look to align your asset allocation with your risk profile and investment timelines. Your risk profile looks at your risk tolerance levels and how comfortable you are with short-term market volatility that may occur. Some investors are more risk-averse, while others are more risk-tolerant. You should also ensure that you are always aligned with your financial goals and plan. At 10X, we offer a variety of funds that suit a range of investors. Please visit our funds page for the most up-to-date fund information.

Why fees can impact your long-term habit

Often, investors fail to realise the importance of fees. Higher fees may mean that you have fewer available returns to reinvest. This is especially true when these fees are compounded over many years. If your fees are low, this may mean you have more available returns to reinvest, which can potentially grow and compound over time. You should make sure that you carefully review the fees that you are being charged. There are some typical fees that you may see on your statement. These are the following:

• Management fees: These are the fees that you will see for the running and management of the fund.
• Advisor fees: Your advisor will provide you with services and advice, and for this, they will usually charge both an initial and an ongoing fee.
• Administration fees: These will be the fees for administration tasks related to the fund. For example, reporting, tax and similar tasks.

Let’s look at an example to illustrate the effect of fees of 3% versus fees of 1%: We will assume the following information for our example:

• Investment period of 30 years
• Initial lump sum investment of R50,000
• Monthly contributions of R2,000
• Return of 12% per annum
• An inflation rate of 6%

Example 1 (1% Fees): Real investment value is approximately R1.8 million

Example 2 (3% Fees): Real investment value is approximately R1.3 million

We can see how even a modest difference in fees can make a major difference in retirement outcomes. This example is for illustrative purposes only, and real results may vary. You can learn more about the impact of fees here.

Your Effective Annual Cost (EAC) shows you the fees and costs that come with owning an investment product over one year. This is a standardised metric which was introduced by ASISA in 2015. All things being equal, you may see that a higher EAC would result in fewer returns being available for reinvestment compared to a lower EAC, which may mean there are more returns available to be reinvested and potentially compound over time. The EAC should be just one factor to consider when comparing service providers. Our fees are low, simple and transparent at 10X. Please explore our products for the most up-to-date fee information.

Why investment strategy matters

An index-tracking investment strategy is an approach to investing that focuses on discipline, simplicity and consistency over time. A benchmark index, such as the S&P 500, is mimicked in order to try to get the same results as this benchmark. This may then mean that there will be a lesser number of activities involved and therefore lower overall costs and, ultimately, fees for you, as the investor. A simpler investment approach may be more aligned with creating a long-term, consistent RA habit.

An actively managed strategy will involve a fund manager who actively seeks out the best stocks. This approach will involve research, analysis and buying and selling costs. It may mean overall higher costs, which may be passed onto you as the investor in the form of fees. The S&P Indices Versus Active (SPIVA) Scorecards track the performance of actively managed funds against their benchmarks globally. According to the latest SPIVA South Africa Scorecard (as of June 2025), 67.61% of South African actively managed equity funds underperformed the S&P South Africa DSW Capped Index over the ten-year period ending June 30, 2025.

Behavioural tips to stay on track

Building a successful retirement annuity is about maintaining disciplined and consistent behaviour over the long term. Here are some practical behavioural tips that may help you stay on track with your retirement annuity investing:

• Stay focused on your long-term goals: Always keep your focus on your long-term goals and financial plan. Your retirement annuity is designed to be a long-term investment, so short-term market movements should not distract you from your overall strategy.
• Avoid reacting to short-term noise: Don’t get side-tracked by market noise that may occur in the short term. Markets will naturally experience periods of volatility over time. Making emotional, knee-jerk decisions in response to market declines can negatively impact long-term investment growth.
• Do not check performance too frequently: Try to avoid checking your RA performance too often. Constantly monitoring your RA performance may increase anxiety and lead to unnecessary decision-making.
• Be clear on your retirement objectives: Understanding what you are investing for can help you remain motivated and consistent. Clear retirement goals may make it easier to maintain disciplined investing habits over many years.
• Review your RA annually, but not excessively: An annual review is a great way to ensure that your retirement annuity is still aligned with your risk profile, financial goals, and investment timelines. This review should include your fees, asset allocation, and overall investment strategy.

When it comes to your RA, your behaviour can have an impact on the overall long-term outcomes. H2: Final thoughts: Small actions, big outcomes If you take a consistent and disciplined approach to your investing, you are setting yourself on the right track for your retirement years. It’s important to start early, even if your contributions are small. These can be increased as your earnings rise over time. If you haven’t yet started contributing to your RA, now is the time to get started. Get in touch with 10X investment consultants if you have any queries surrounding retirement annuities, or if you’d like to get started with a 10X Retirement Annuity today!