Living annuity providers: How to choose the right one

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Every year, many South Africans convert retirement savings from products such as retirement annuities or preservation funds into living annuities. In many cases, however, they don’t evaluate service providers effectively, which can lead to substandard retirement outcomes, and in extreme cases, a loss of retirement capital.

Your choice of service provider can play an important role in the performance and, ultimately, the longevity of your living annuity. Factors linked to the choice of service provider, such as fund performance, fees and transparency, can impact the value of your investment. In this article, we will give you the facts about evaluating and selecting service providers, with a focus on the importance of low fees and transparency.

What a living annuity does (and why provider choice matters)

A living annuity is a long-term investment that will provide you with an income during retirement, while your savings remain invested, allowing them to potentially grow and compound over time. As an investor, you have the flexibility to choose both your drawdown rate and the underlying funds. Your drawdown rate is the percentage of the total value of your annuity that you withdraw as income each year. This can be a percentage between 2.5% and 17.5%, and can be amended each year before your policy’s anniversary date.

You can also select the frequency at which you receive your payments. This can be annually, biannually, quarterly or monthly. The drawdown rate will need to be carefully managed to ensure that the annuity is sustainable and does not run out too quickly. This responsibility will lie with you, as the investor, to ensure that your savings last throughout retirement. Another major part of a living annuity’s appeal is the ability to pass on the remaining capital to your beneficiaries outside of your estate, and therefore tax-free.

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A living annuity is different to a life annuity (also referred to as a guaranteed annuity). A life annuity is purchased from an insurance company and will provide you with a fixed income for your life. Compared to a living annuity, there is less flexibility after the initial purchase, but also less longevity risk, as you will be paid out a fixed income for the remainder of your life.

The provider that you decide to use for your annuity can affect the fund choice that you have access to, the fees you pay, transparency and the performance of your annuity in the long run. In the section below, we’ll run through some of the most important factors to keep in mind when choosing a provider.

The key factors to compare when choosing a living annuity provider

Choosing where to invest your living annuity is a big decision, and understanding what really matters can help you make a confident, informed choice.

Fees and costs

Fees are one of the most important, and often understated, factors to keep in mind when deciding on a living annuity provider. What you may think is only a small difference in fees can compound over time and significantly impact the growth of your annuity. High fees may mean that there are fewer returns available to reinvest, while lower fees help ensure more of your money continues working for you.

The typical fees which you may see deducted are as follows:

• Management fees: These are the fees charged in order to run and manage the fund.
• Advisor fees: Advisors will charge for their advice and services. You may see both an initial and an ongoing fee charged. These fees can range, depending on what has been agreed upon with your advisor.
• Administration fees: There will be fees charged for administration tasks. These may be tasks such as compliance, reporting and tax.

A useful metric to use when comparing costs is the Effective Annual Cost (EAC) of your living annuity. The EAC is the total cost of owning an investment product over one year. It is a standardised metric which was introduced by ASISA in 2015. All factors being equal, you may find that a higher EAC means that there are fewer returns to be reinvested and allowed to compound over time. A lower EAC may mean that there are more returns available to be reinvested and allowed to compound over the long term.

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The EAC of your investment would be just one factor to consider when evaluating service providers. You should be aware of all fees and costs deducted from your living annuity. Checking on your investment statement and reviewing your EAC each year will help ensure that you are on top of all charges that have been deducted. High fees have the potential to impact the real investment value, especially when compounded over time.

Let’s look at an example which shows fees of 0.86% compared with fees of 3% and the significant effect of this on your living annuity. We will assume the following for this example:

• Investment amount: R2 million
• Investment period of 25 years
• Drawdown rate: 4% (assuming an annual payment)
• Return of 12% per annum
• An inflation rate of 6%

Example 1 (0.86% Fees): Real investment value is approximately R2.36 million.

Example 2 (3% Fees): Real investment value is approximately R1.45 million.

We can see how small differences in fees can make a significant difference over time. Note that this example is for illustrative purposes only, and real results may vary. You can learn more about fees here.

At 10X, we make comparisons easy through our EAC calculator, which forms part of our free suite of online tools for savvy investors on offer. This can be useful if you are looking to compare and evaluate the EAC charged by your service provider with the EAC charged by 10X.

No matter who your provider is, there should be no hidden costs, and the fee structure should be simple and straightforward for all investors to understand.

At 10X, our fees are transparent, and you’ll never have to worry about surprise costs or hidden fees. We charge fees of less than 1% for most retirement products. To find out about our latest product-specific fee information, explore our products page. Fee information is correct as of the 4th of November 2025.

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Investment strategy

Understanding how your provider invests money is as important as knowing how much they charge.

Active investment strategies rely on fund managers who aim to pick the winning stocks and try to ‘time’ the market. This approach involves more research, analysis and trading. This may mean that there are higher costs involved, which may then be passed onto you as the investor, leading to higher costs overall.

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An index tracking investment strategy is when a benchmark index, such as the S&P 500, is mirrored in order to try and get the same returns. There may be fewer activities involved with this strategy, which makes it a more cost-effective option.

Data from the SPIVA Scorecards suggests that index tracking may outperform active management most of the time. According to the latest SPIVA South Africa Scorecard (as of 31 December 2024), 60.84% of South African actively managed equity funds underperformed the S&P South Africa DSW Capped Index over the ten-year period ending 31 December 2024.

At 10X, we use an index tracking investment strategy with a more active approach to asset allocation in an investment strategy geared towards long-term returns that produce the investment and retirement outcomes our clients deserve. Within the living annuity structure, you can choose from a selection of 10X funds designed to align with your risk profile, investment horizon and retirement goals.

Transparency and reporting

Making use of a provider that provides regular and transparent reporting can help build the trust relationship. As an investor, you would ideally look for clear reports that are easy to access.

Reporting should include detailed information on fund performance, asset allocation and costs deducted from your investment. Consistent communication will also allow you to track whether your living annuity remains aligned with your financial goals and risk appetite. A transparent provider will help you stay informed and confident about how your savings are being managed.

Some providers may send out regular investment statements, tax certificates and similar, while other providers may direct or prompt you to their online platform via email in order to access documentation such as tax certificates. Leading providers make it simple to access key documents.

At 10X, we prioritise transparency and simplicity. Our digital platform provides clear, concise statements and performance reports designed to help investors understand exactly how money is performing and where fees go.

Service, support and accessibility

Another important area is the service and support you receive. Good service and strong support can make a meaningful difference to your investment experience, especially in retirement, as your financial needs may evolve over time.

It’s also worth considering the quality of educational resources and digital tools offered by your provider. A strong client support model should empower you with knowledge, calculators and easy-to-understand guides to help you make confident and independent decisions.

Ideally, you should find a provider that values proactive communication and not just annual statements, as this ensures that you remain informed about market trends, performance updates and any legislative changes that might affect your retirement plan.

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You would ideally look for accessible consultants who are responsive and able to assist you with any queries that you may have quickly and efficiently. If you need help with starting an investment or making changes to it, such as your drawdown rate, is it easy to find someone to help you?

At 10X, our experienced and qualified investment consultants are easily accessible to answer any questions and queries that arise. Whether you prefer phone, email, or online chat, we aim to make the process simple, efficient and assured.

Living annuity asset allocation: Choosing a fund

The flexibility offered by your living annuity includes choosing an asset allocation that matches your risk tolerance levels, investment timelines and financial goals. Asset allocation is the mix of equities, real estate (property), bonds and cash that your savings are invested in. As an investor with 10X, you have the ability to adjust your underlying portfolio by choosing from a selection of carefully curated funds, each with a different asset allocation and geared towards different investment profiles.

Equities are the more volatile of the asset classes, but they may also generate better returns. As data suggests, 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), but past performance does not guarantee future results. Real estate can generate solid returns and serve as a hedge against inflation. Bonds will add some stability to your portfolio, but they are likely to generate lower returns. Cash will generate the lowest returns of all the asset classes, but it is also the most stable. As an investor, you would generally look to diversify across the different asset classes in order to balance risk versus return.

Asset allocation plays the biggest role in the performance of your living annuity, accounting for over 90% of returns, as seminal research from Brinson, Singer and Beebower shows. You may also look to diversify your portfolio offshore. Regulation 28 of The Pensions Fund Act does not apply to living annuities, which means you can diversify your portfolio 100% offshore, if preferred. This may be a good choice for you if you already have your portfolio heavily invested in the local South African market. Diversifying offshore can also provide a hedge against local market volatility and depreciation of the Rand.

Checklist: How to assess your current (or potential) living annuity provider

You can assess a provider against the following criteria to help you get an idea of the suitability of this provider:

1. Fees and transparency: Are the provider’s fees competitive, clearly disclosed and free of hidden costs?
2. Investment choice: Does the provider offer a well-diversified range of funds, both local and offshore, to align with your risk profile and return objectives?
3. Platform flexibility: Is there an intuitive, easy-to-use online platform that allows you to make important updates, such as adjusting your drawdown rate or switching funds, quickly and securely?
4. Reputation and trustworthiness: Is the provider reputable, well-regulated and backed by a proven track record in managing retirement investments?
5. Access to information: Can you easily access key documents such as statements, performance reports, and tax certificates without unnecessary delays or complexity?

This list can serve as a valuable tool for reviewing your existing provider, helping you identify whether your current solution continues to serve your best interests. H2: Final thoughts on finding the right living annuity provider Choosing the right living annuity provider is about more than just investment returns; it’s about partnering with a provider that gives you peace of mind. The provider that you choose should give you confidence that your retirement savings are being managed responsibly, transparently and in a way that aligns with your long-term retirement goals.

Fees, transparency and service all play a major role. If you’re unsure whether your current provider is offering the value you deserve, consider exploring a 10X Living Annuity, where simplicity, low fees and full transparency are a part of our ethos.

Our experienced investment consultants are here to answer any questions you may have. Get in touch with us today to learn more about how 10X can help you on your way towards a financially secure retirement.