Living Annuity Masterclass: Increasing retirement income and decreasing risk

If you want to make the most of your retirement income and keep risk under control, this Living Annuity Masterclass is a great place to start. Hosted by 10X Investments, it’s designed to help South Africans retire smarter and with more confidence. Whether you already have a living annuity or you’re thinking about getting one, this session is packed with practical insights you can use right away.

It’s especially useful if you’re planning your retirement income strategy, trying to make your savings last (and grow), not happy with your current provider’s fees or performance, or simply want a bit more financial peace of mind in retirement. This masterclass is moderated by Simon Brown, with Brett McKay from 10X Investments and Chris Eddy, Head of Investments at 10X.

Key moments:

• 00:50 What retirees really want to know
• 02:16 Fees and the EAC explained
• 03:39 Switching to lower costs
• 06:10 Risk profile and longevity
• 08:06 Drawdowns and the sustainability equation
• 10:00 Valuations, expectations, and the next decade
• 20:06 Staying invested through cycles
• 21:20 Offshore versus onshore mix
• 38:02 Where the opportunities are now
• 42:07 Quick hits on fees, transfers, and timing

Control the controllables: fees first, always

Raising retirement income starts with what you can control. Fees and costs. Your Effective Annual Cost (EAC) is the clearest single number for total costs. It adds advice fees, platform fees, administration charges, fund fees, and any performance fees. Ask your provider for the EAC document. It is a formal disclosure, and it is your right to see it. Lower EAC means less leakage from the portfolio and more money compounding for you.

Switching providers: simpler than you think

If your EAC is eye-watering, you can switch.

• Before retirement: Retirement annuity or preservation fund transfers happen under Section 14.
• After retirement: Living annuity transfers happen under Section 50.

Living annuity transfers keep your anniversary date and do not interrupt your income. Legacy products may carry exit penalties, which will be shown on your statement. Even where penalties apply, many investors still come out ahead once they land in a lower fee structure.

The retirement engine room: asset allocation over decades

Retirement is a long journey. If you retire at 65, your horizon can stretch 30 years or more. To fund an inflation-linked income, the portfolio must grow by roughly your drawdown plus fees plus inflation. Over full cycles, high equity balanced funds have historically targeted inflation plus five to six. That growth comes with short-term volatility. Accepting that trade-off is part of sleeping well over the long run.

Drawdowns that last: the sustainability equation

The legal drawdown range on a living annuity is 2.5% to 17.5%. The sustainable zone for most investors sits around 5% to 6%. A simple guide: every 1 million rand at a 6% drawdown pays about R5,000 per month. The golden equation is straightforward:

Fees + Drawdown + Inflation < Expected Return

If this inequality holds over time, your capital should endure, and your income can rise with inflation.

Income timing and flexibility

You can receive income monthly, quarterly, biannually, or annually. Many retirees choose monthly debit orders and medical aid. One advantage of a living annuity is annual flexibility to change the rate at your anniversary, which can help with one-off travel plans or unexpected expenses.

Tax basics that matter

At retirement, the first R550 000 of lump sum withdrawals may be tax-free, subject to prior withdrawals. Once funds sit inside a living annuity, growth is tax-exempt within the product. Income drawn is taxed at your marginal rate. The structure works like a salary payment after PAYE. For investors with taxable assets outside the annuity, the living annuity can serve as a useful tax shelter for ongoing growth.

Inflation, expectations, and the next five years

Recent inflation has been low by South African standards. Returns on balanced funds have been strong. It has felt great. That does not mean the next five years will look the same. US equity valuations are elevated. Global indices are concentrated in a handful of mega caps. Expect more modest real returns than the rear-view mirror suggests. Set expectations accordingly.

Offshore versus onshore: finding the sweet spot

All-or-nothing bets increase the odds of disappointment. Long-run modelling of income sustainability shows a smile-shaped result. Very high onshore or very high offshore allocations can both raise the risk of failing to keep pace with inflationary increases. The sweet spot often sits between 40% and 60% offshore. That range balances currency hedging, sector access, and diversification without relying on a single outcome.

Guaranteed annuities and hybrids

Guaranteed annuities exchange capital ownership for a set income for life. That can be helpful for non-negotiable expenses like medical aid. Living annuities retain ownership and allow flexible drawdowns, portfolio changes, and beneficiary nomination. Many retirees choose a hybrid. Lock in a base income with a guaranteed annuity, keep growth potential and flexibility in a living annuity. Read the terms carefully. There are many variations, and once you move to a guaranteed annuity, you cannot reverse back to a living annuity.

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Beneficiaries and estate planning

A living annuity pays out as a death benefit outside the estate. Beneficiaries can take a lump sum, which is taxed in the deceased’s hands under the retirement tables, or they can continue as a living annuity in their own names. This flexibility is a key advantage when planning for family needs.

Implementation that serves outcomes

10X uses asset allocation to drive outcomes. The goal is not to beat a specific share index in any given year. The goal is to deliver reliable real returns over rolling periods that support an inflation-linked income. Index building blocks reduce manager selection risk. Capped index approaches help manage concentration risk both in South Africa and offshore, where a small group of shares carry large weights.

Can you change portfolios later

Yes. You can change portfolios during the year, although it is better to set a long-term strategy and avoid reacting to headlines. The right posture is time in the market, not trying to time the market. A practical example from the discussion makes the point. An investor who wanted to switch out after a sharp drawdown stayed the course and is now comfortably ahead.

Where opportunities look attractive right now

While timing short periods is difficult, starting yields and valuations help frame the next five to ten years.

• US equities: elevated starting valuations suggest lower long-run real returns from here.
• South African bonds: current yields offer inflation plus five on inflation-linked bonds. That is a high hurdle for other assets and aligns well with a living annuity objective in a lower volatility way. Boring perhaps, but effective.

This mix can help deliver the real income you need while awaiting more attractive entry points into higher growth assets.

Quick answers to common questions

• Where do I find my EAC Ask your provider for the EAC document. It aggregates all fees so you can compare like-for-like.
• Can I transfer an existing living annuity? Yes. Section 50 transfers keep your anniversary date and do not interrupt income.
• How often can I change drawdowns? Once a year at your policy anniversary. 10X emails you a month before to confirm any changes.
• What is a reasonable EAC? Aim to be below 1.5%. The lower your fees, the more of your real return you keep.
• What if my current funds are not available at the new provider They are liquidated to cash, transferred, and then reinvested into the new portfolios.
• Can I still open a Reg 28 retirement annuity later in life Yes. You are never too old to open an RA. Contributions can offset tax, and you can later add that value to your living annuity.
• Do I have to move to an annuity when I retire from a fund Yes. Any portion not taken as a permitted lump sum must go to a living annuity or a guaranteed annuity.

10X is here to empower you

Knowledge and discipline are the real edge. Lower fees. Sensible drawdowns. Diversified asset allocation matched to your time horizon. If you want to check your costs, start with your EAC. If you want to model income, use a living annuity calculator and map your drawdown against realistic return ranges. If you want a guide, speak to an investment consultant who will help you set expectations and stay the course.

As always, this is general information, not personal advice. For guidance tailored to your situation, contact the 10X team.