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A blended living annuity

Just Lifetime Income in a living annuity

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

What is a blended living annuity?

blended living annuity is a product that allows you to balance a sustainable retirement income for life and discretionary living annuity investments – all in a single product.

Unlike having two separate products, a blended living annuity allows you to structure a suitable portfolio over time, balancing the trade-offs of essential and discretionary spending as they arise.

For example, you could switch additional tranches into the life annuity component when you need to increase the guaranteed income portion as you age.

Blending inside partner living annuities

A blended living annuity offers a guaranteed life annuity (Just Lifetime Income) as an investment portfolio inside a living annuity’s legal structure. Just SA currently provides the lifetime income portfolio in six partner living annuities. Features of both products are available in one solution.

Benefits of the Just Lifetime Income (JuLI) portfolio

  • Secure, lifetime retirement income
  • Increases linked to the performance of a specified balanced fund
  • Income payments cannot reduce, no matter what happens to investment markets
  • Higher rate of return due to benefits of risk pooling associated with a guaranteed life annuity

Partner Living Annuity

  • Offers flexible income, within regulated limits
  • Discretion over how balance of the assets is invested
  • Any “unused” JuLI income builds up in the living annuity in a tax efficient manner
  • Capital balance remaining at death paid to beneficiaries

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Why Blend?

Decrease the risk to your retirement income

Research shows that a combination of a living annuity and a guaranteed life annuity is an optimal solution, compared to either product on its own.

A living annuity is not risk-resistant

A recent study of around 30% of the living annuity market conducted by Just SA, revealed:

  • an average drawdown rate of 8.5% per year
  • two thirds draw more than the recommended sustainable drawdown rate and risk running out of retirement income

There are three possible scenarios or 'zones' for living annuitants in South Africa.

They are either:

  • Drawing an income at a sustainable rate (safe zone)
  • Drawing an income that is above the recommended sustainable rate, but below life annuity rates (risky zone)
  • Drawing an income at an unsustainable rate, above life annuity rates (danger zone)

Income Sustainability Map Example

According to Deane Moore, this is ironic because half of these living annuity policyholders could guarantee a regular income for life, with annual increases that target inflation, by investing part of their living annuity assets in a life annuity (i.e. those in the ‘Risky Zone’ in the diagram above).

The simple reason that life annuities sustain a higher income for life is that policyholders pool their risk, and those who die earlier cross-subsidise those that live longer.


The benefits of including JuLI as a portfolio inside a living annuity:

  • The combination improves the sustainability of a living annuity
  • You can secure an amount to cover essential expenses and provide a safety net to manage the risks of a living annuity
  • It allows for a more aggressive investment strategy to be adopted on the non-JuLI assets
  • It allows an optimal balance between income security, flexibility, and capital legacy

Do you need more information?

Consider seeking advice from a qualified financial adviser. Contact us to request the details of an adviser in your area, or to find out more about our offering.

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