Living Annuitants

For questions to ask your financial advisor and information regarding the preferential rates offered to UCTRF living annuitants, click here. 


Please click here for the 2023 Living Annuitants presentation.

Please click here for the 2023 Financial presentation.

Please click here for the full Webinar recording.

A living annuity (as opposed to a life annuity) can be (but is not always) an appropriate form of pension.  As with any financial instrument it carries both risks and opportunities. 

If you are considering using a living annuity to provide you with a pension at retirement:

  • Take advice, and make sure this is right for you before you decide.

 If you have decided to use a living annuity to provide you with a pension at retirement:

  • Consider the advantages of a UCTRF living annuity before you decide.


What is a living annuity?

This works somewhat like a bank account. You decide where the money is to be invested, and how much of this money you want to take as a pension in each year (minimum 2.5% and maximum 17.5% of the capital value). If you take too much out too quickly or the investment markets have performed poorly  or you live for longer than you thought you would, the “account” may decrease to such an extent that the income provided is meaningless.

Living annuities are very flexible products and offer many attractions to the sophisticated investor. They do, however, have some significant challenges.

The advantages and disadvantages of a Living Annuity are shown below:

Advantages Disadvantages
You control the amount of pension which you take – so you can adjust it to changing needs. You may take too much pension and end up with too little money to last until your death.
You have full control and make active decisions. You have full control over where the money is invested and the pension amount – will you be able to make sound decisions when you are older?
You gain fully from good investment performance. You lose fully from poor investment performance.
When you die, the remainder of the “account” is paid to your dependants or nominees. You may live longer than expected, ending up with too little money to last until your death.
You can exit and buy a Life Annuity later.
You can transfer your Living Annuity to another provider.
Drawing too much, or poor investment performance, may result in a decreasing pension.

This may be a good option for you if:

  • you are willing to tolerate the possibility that your pension may run out at some point before your death, AND
  • you are happy to carry the responsibility of making decisions about your pension (investment and amount) continually until you die (possibly at the age of 90+), AND
  • one or more of the following applies to you:
    • you have an alternative source of income in retirement, and/or 
    • you will continue to work in retirement, and/or
    • you are in bad health and expect to live shorter than most people (less than say 10 years), and/or
    • you need to leave something for your estate because your children will depend on this for their survival if you die, even if this happens many years in the future.

In summary, with a Living Annuity, you make the decisions (around where the money is invested and how much annual pension you take), have the most flexibility and have the least guarantee that your pension will last until your death. You bear the investment risk and the risk of living too long!

It is your responsibility (in consultation with the financial advisor) to ensure that the income level selected is at a level that will be sustainable for a lifetime. The income drawdown relative to the investment return on the capital to achieve this, needs to be carefully managed.

Speaking to a competent financial advisor is invaluable in helping you to decide whether a Living Annuity is the right choice for you, and if so, to help you to manage the risks involved. Apart from explaining both the advantages and the risks of a Living Annuity, a financial advisor must explain and compare these advantages and risks against conventional annuities, where a long-term insurer carries the full investment risk and the risk of the annuitant living longer than expected.

Risks involved in a Living Annuity

The three main risks involved in a Living Annuity are as follows:

  1. Drawdown risk – the risk of taking too much pension too quickly;
  2. Longevity risk – the risk of living longer than expected and therefore outliving your capital;
  3. Investment risk – the risk of poor or volatile investment performance.
These are discussed below.

As a Living Annuitant, you will have the responsibility for choosing the amount of pension or drawdown each year (within the minimum of 2.5% and a maximum of 17.5% of the capital value per year). The temptation may exist to draw too high a percentage. A high drawdown will very quickly erode the capital base, and will result in an inadequate pension within the space of a few years. As a rough rule of thumb an annual drawdown rate above 6% will probably result in great hardship in later years. Use the Living Annuity Calculator for an illustration of the income you can expect to receive using your capital and investment and drawdown choices. 


Lump sum

Income Draw

Income per annum

Income per month


R1 000 000


R70 000



R995 100


R74 200



R985 363


R78 652



R970 181


R83 371



R948 886


R88 373



R920 749


R93 676



R884 968


R99 296



R840 669


R105 254



R786 894


R111 569



R722 597


R118 264



R646 637


R113 161



R570 819


R99 893



R503 890


R88 181



R444 809


R77 842



R392 655


R68 715



R346 616


R60 658



Many people have an inaccurate view of how much longer they will live once they retire – in fact usually people underestimate how long they are going to live! The following table shows, how long, on average a male and female are expected to live if they retire at different ages.

Retirement age

Life expectancy




23 years

29 years


20 years

24 years


16 years

20 years

The above figures may well understate the position, because life expectancy of people is increasing and living into one’s 90’s is now common. So you must make sure that when you are planning your finances you make adequate provision for how long you are actually likely to live.

If the returns are too low relative to your pension taken, this will result in the capital value of your Living Annuity account decreasing. This may prompt you to choose a more aggressive investment portfolio in the search for higher expected return. Unfortunately, portfolios with a higher expected return usually are accompanied by higher volatility, which can mean that in some years, the same percentage of capital (drawdown chosen) will mean a much higher or lower pension in that particular year relative to inflation. It is thus very important to balance the need for high returns with the need for stable market values.

How to choose your drawdown percentage

A drawdown is the percentage of the remaining capital value that the Living Annuitant chooses to receive as income for the year. You must choose your drawdown or pension every year. The pension can be paid to you monthly, quarterly, biannually or annually. (A monthly pension will be paid in arrears.  You can choose to receive a quarterly, biannual or annual drawdown either in advance or in arrears.) The drawdown must be between 2.5% and 17.5% of the remaining capital value.

The UCTRF's administrator will send your Annual Income Change form to you for completion at outset, and then annually within two to three months of your annuity anniversary date. This form contains various drawdown percentages which are designed to guide you as to what level of drawdown would be reasonable at your age. Please note that this is guidance only and does not represent any guarantees.

In general, it is always better to start on the lowest possible drawdown level that  you can afford, since this will allow for less chance of the capital being eroded quickly, more growth and the likelihood of being able to afford higher drawdown levels later, when you may need more (e.g. for medical costs).

Please complete and return this form to the Administrator by the due date to ensure the continuous payment of your pension.

In addition, you may make use of the Living Annuity Calculator. This calculator will provide you with an estimate of the income you can expect to receive over your expected lifetime depending on your drawdown and investment choices.

When using the calculator, the full financial situation should be taken into account, with all sources of income. It is an indicative guideline to assist in making informed decisions about a living annuity only.

Managing your Investment Choice

Living Annuity investment portfolio options

As a Living Annuitant you have exactly the same Portfolio options to choose from as you had as an active member/ Deferred Pensioner of the UCTRF, i.e. 

In the event that your living annuity income is paid from more than one portfolio and one of the portfolios is depleted, you will be prompted by the UCTRF administrator to advise your new preferred drawdown rate from the remaining portfolios.

If you do not respond timeously (before the next scheduled payroll run) to the request, the UCTRF administrator will apply any shortfall to be disinvested from the remaining portfolio (excluding the Shari’ah Compliant Portfolio) and this action will continue until such time that you advise your preferred disinvestment instruction, death, until depletion of capital, whichever event occurs first.

How do I choose an investment portfolio?

Living Annuitants have different needs and requirements when it comes to investments and the risks they, as pensioners, can accommodate. Each portfolio in the UCTRF has its own unique Risk Profile and you choose the portfolio that is most suitable for you and with a Risk Profile that closely matches your needs and expectations.


How important are historic returns when choosing an investment portfolio?

Portfolios invested in shares will usually have good returns in some years and poor returns in other years, but over a twenty-year period, their chance of achieving good returns is high. It is therefore not a good idea to look at short-term historic returns when deciding on which portfolio to choose. Typically, members switch out of poor performing portfolios when markets fall and are not there to reap the good returns when these portfolios eventually recover.

When may I switch?

You may now switch portfolios at any time. You will get one free switch in each period between 1 July and 30 June and additional switches in this 12 month period will incur the applicable administration fee at the time, which will be debited to your fund credit.

If you need any assistance, please contact the UCTRF Office via this form.

Exiting from a Living Annuity

Can I transfer my Living Annuity with the UCTRF to another insurer?

You may use the balance in your Living Annuity Account to purchase either a Living Annuity or a Life Annuity from another Insurer. However, you have to use the full balance in your Living Annuity Account and not only a portion of it. Legislatively, you are also not allowed to split your balance and purchase a Living and Life Annuity. 

This process is governed by Section 14 of the Pension Funds Act and requires the UCTRF to complete a transfer application once the member’s signed application form (of the living annuitant’s new external life or living annuity) is received by the UCTRF. The process is as follows:

  1. The Administrator will forward the living annuitant’s signed application form, the living annuitant’s fund balance and other UCTRF information to the UCTRF Employee Benefits Consultant who will draft the transfer application.
  2. Once completed, it will need to be signed by the Principal Officer, Chairman of the Board and another Trustee.
  3. Thereafter, all the paperwork will be forwarded to the transferee fund i.e. the external life or living annuity fund, for their office bearers to sign the relevant documents which form part of the transfer application.
  4. The transfer application is then submitted to the Financial Services Conduct Authority (FSCA) for approval.
  5. Once the FSCA approval has been received , the Administrator will action the transfer (after the deduction of any applicable MVA) of the balance held in the UCTRF living annuity. It will be finalised as soon as possible once a nil tax directive has been successfully received from SARS.
The process prior to the submission (steps 1-4) can take between 2 to 3 months to complete. Thereafter, the approval depends on how long the FSCA takes, which can take approximately 2 months. As such, a transfer out of the UCTRF living annuity could take up to 6 months or even longer to finalise, depending on how long the FSCA takes to approve the transfer and SARS to issue a nil tax directive. 

Please note: 

If you choose to transfer out of your existing UCTRF living annuity:

  • You cannot leave a portion of the balance in your existing UCTRF living annuity and only use a portion to purchase an external annuity – you have to purchase an external annuity with the full amount.
  • You also cannot use a portion to purchase an external living annuity and a portion to purchase an external life annuity – you have to purchase either an external living or an external life annuity with the full amount. However, there are blended living annuity products available in the market. You will have to speak to an accredited financial advisor to assist you in identifying an appropriate external annuity product for you.


Can I withdraw the capital from my Living Annuity?

If the living annuity capital balance falls below the amount prescribed by SARS, at that time, you may commute the amount and be paid this in cash.

What happens to my living annuity in the event of my death?

The remaining capital can continue to be paid to your Beneficiary or Beneficiaries as it was paid to you, or it can be taken as any other pension that may be purchased, or your Beneficiaries can elect to take a lump sum payment.

The individuals to whom the capital balance will be allocated, as well as the actual allocation, is determined by the Board in terms of Section 37C of the Pension Funds Act.

Section 37C of the Pension Funds Act and the UCTRF rules state that in the event of your death, your benefit in the UCTRF should be distributed as follows:

  • to legal/financial dependants; or
  • to legal/financial dependants and nominees; or
  • if there are no legal/financial dependants, to nominees (but any deficit in your estate first has to be settled); or
  • if there are no dependants or nominees, to your estate.

Although the Board will consider the members’ wishes in terms of their nomination of Beneficiary form, the final decision of who will receive the UCTRF death benefits rests with the Board, who must abide by the UCTRF Rules as well as Section 37C of the Pension Funds Act.

You can update your Beneficiary nominations online. Click here to find out how.

If you don’t want to make online Beneficiary nominations changes, you can complete the HR151(a) and send the originals to the UCTRF Office.

If you would like to motivate your recommendations, include a motivation with your nomination. Please draft your motivation on the assumption that it will be acted on in the next twelve months.

Costs associated with Living Annuities

Fees and costs associated with taking a living annuity from the UCTRF:

  • There is a once-off set-up fee charged by the UCTRF when a new Living Annuity pension commences. This is currently R660 (including VAT), and will be deducted from the retiring member’s accumulated credit at the time that the Living Annuity is set up.
  • Monthly amounts are deducted from the Living Annuitant’s account to cover the expenses of maintaining the account and making income payments to the Living Annuitant. Currently these charges are R109 per month (excluding VAT) for administration, and R16.55 per month (including VAT) for annuity payments. 
  • If you want to switch investment portfolios, you will get one free switch in each period between 1 July and 30 June. Additional switches in this period will incur the applicable administration fee at the time (currently R637 (including VAT)), which will be debited to your fund credit. You do not have to switch, and most members do not wish to do so, as retirement savings should focus on a long-term investment strategy. 
  • The Living Annuitant will pay investment management fees on the same basis as in-service members of the UCTRF. These can be viewed here:
  • You may need to seek financial advice before making an investment decision.

Living annuities from Insurers are generally more costly than the UCTRF living annuity option, particularly in respect of the investment and advisor fees.  When deciding on the best living annuity for your circumstances you should ensure that you understand the difference in the costs of the options available to you.


Life Annuities

An alternative to a Living Annuity is a Life Annuity

In the case of a Life Annuity, you pay over an amount to an insurer in return for a pension. The amount of initial pension that you will receive is set by the insurer (as set out in quotations), and the pension is guaranteed to be paid for the rest of your life.

The advantages and disadvantages of a Life Annuity are shown in the table below:

Advantages Disadvantages
Pension is guaranteed to be paid for life, and in accordance with your wishes as regards guarantee term and provision for your spouse.  No flexibility in level of pension, once the pension has been set up.
You can specify a guarantee term of (e.g.) 5 years, which means that the pension is guaranteed to be payable to your dependants even if you die before the end of the guarantee term. If you die after the “guarantee term” has ended, no benefits are available for your dependants or estate.
You don’t have to make any management decisions except at the point of retirement. At this point you decide the “guarantee” and the level of increase that should apply each year. No possibility of exit.

This may be a good option for you (compared to the Living Annuity) if any of the following apply:
  • You want a guarantee that your pension will be paid for the rest of your life and not run out.
  • You are in good health and expect to live longer than most people of your age.
  • Your children are not financially dependent on your estate, or will be financially independent within the next few years.
  • You don’t want the responsibility of making decisions about your pension (investment and amount) continually until you die (possibly at the age of 90+).
There are two types of Life Annuities which are available, which differ only in the pension increases which are awarded to pensions:

Inflation Linked Life Annuity With Profits Life Annuity
You pay over an amount to an insurer in return for a pension (the initial amount is set by the insurer at the time of purchase) which will increase with inflation every year and will be paid for the rest of your life. You pay over an amount to an insurer in return for a pension (the initial amount is set by the insurer) which will increase as determined by the insurer every year based on investment performance and will be payable for life.
Pension increases are guaranteed to keep up with inflation and are not linked to investment performance. Pension increases are determined by the insurer depending on investment performance – these could be 0% in poor years, or higher than inflation in good years.
Lower initial pension. Higher initial pension.

Good option for you if:
- You want certainty around the amount of pension which you will receive, be protected against inflation and know that this will be paid for as long as you live.

- Future investment performance is poor.
- This is your only source of income in retirement.

Good option for you if:
- You are willing to tolerate the possibility of lower than inflation pension increases in return for the possibility of higher than inflation pension increases.
- You want a pension that will be paid for as long as you live.
- Future investment performance is good.
- You have alternative inflation linked income in retirement.


If you need financial advice 

Please refer to this web page for questions to ask your financial advisor.  If you do not have a financial advisor, note that Gradidge Mahura Investments (GMI) are the appointed advisors to the UCTRFGMI has been appointed to assist UCTRF members, at preferential rates, with retirement planning and the specific focus in developing a retirement income plan. 


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