Blended annuities

Navigating any landscape begins with knowing where you are, where you want to go and what your perspective is. The same concept applies when choosing a retirement income solution that will see you through the rest of your days.  

Inflation is like rust on a car. At first, you might not notice it. Over time, it slowly spreads, and by the time you see it, the damage is more extensive than you realised. Just like rust, inflation can creep up on you, causing significant issues if not addressed early.

While retirees' attention traditionally centers around not wanting to lose capital at death, along with an inherent desire to retain flexibility and defer big financial decisions, we believe financial advisers have an important role to play in helping to reframe the narrative surrounding annuity options in retirement.

Living annuitants carry their own risk of money running out before they do. And where annuitants can’t afford to (or don’t) draw an income at a sustainable level to last beyond their average life expectancy, they face increased risks.

Many pensioners invested in a pure living annuity run the risk of using up their retirement savings too soon, which could lead them to become a burden in their final years.

One way to better manage the higher risk of living annuities and the rigidity of guaranteed annuities is to use a blended annuity, a retirement income product that has the best of both in one.

One way to better manage the higher risk of living annuities and the rigidity of guaranteed annuities is to use a blended annuity, a retirement income product that has the best of both in one.

Gareth Stokes chatted to Just SA CEO Deane Moore about a pension funding solution that allows clients to incorporate aspects of both life and living annuities into a blended annuity solution. 

A surefire way to secure a stable income in retirement is through a life annuity. But the biggest detractors from a life annuity are often the perceived lack of flexibility, as well as the belief that leaving a capital legacy for beneficiaries is not possible.

Historically, the inability to adjust income from a life annuity has led to many retirees self-insuring against running out of money and is the reason why many South African retirees opt for a living annuity.

We all tend to live in an ‘either-or’ world where we think we need to choose between two, often opposing, things or outcomes. Peanut butter or jam? Red or white wine? For simple things, this way of making decisions can work. But for more complex issues, such as investing your retirement savings, the either-or equation is too simplistic. Pricing Actuary Ryan Hultzer explains how retirement income annuities have evolved and no longer requires an either-or decision.