By Werner Gerber, CFA® | Founder, ClearGauge Wealth
ClearGauge Wealth (Pty) Ltd is an Authorised Financial Services Provider (FSP No. 55826).
Last fact-checked: 2 August 2026
Table of Contents
Quick Answer
In brief
Neither plan is best for all. A living annuity keeps your retirement money invested. You choose the income, but it is not promised for life. A guaranteed annuity uses money to buy an income contract from an insurer. The contract says what income is due. It may give more certainty, but often leaves less choice and less access to money. The key is to decide which risks you can keep and which you want an insurer to take.
Visual Summary
| Key point | Living annuity | Guaranteed annuity |
| Money | Stays in the market. Its value can rise or fall. | Is used to buy income under a contract. |
| Income | You set the income within the rules. It is not promised for life. | The contract sets the income and any rise in it. |
| Main risk | You carry market risk and the risk of a long life. | The insurer may take set risks under the contract. |
| Choice | You may change income at set times. Terms and rules apply. | There is often less scope to change terms once it starts. |
| After death | Money left and death benefits depend on the plan and its terms. | Any pay to a spouse or heirs depends on the option chosen. |
This table is a general guide. It is not a quote, a forecast or a personal recommendation. Terms, fees, income rises, spouse cover and death benefits can differ by provider and contract.
Decision Framework
1. Start With the Income Need
Start with your own bills, not a product name. Put the bills in two groups. First, list costs that must be paid. These may include food, housing, care, medical aid and basic travel. Next, list costs that could be cut for a time. They may include trips, gifts and home work. The split will differ from person to person.
Then write down income you can rely on. This may be a pension, rent or another set payment. Subtract it from the must-pay bills. The gap is the part of the plan that needs the most care. It is often more useful than a total spend figure.
- List must-pay bills before optional costs.
- Check what existing income will pay and for how long.
- Use the gap when you compare real quotes.
2. Put the Risks in Plain Words
In a living plan, your money stays in the market. A fall in the market can cut its value. Taking too much income can also cut the money left for later. Long life is a risk as well. You may need income for more years than you first thought.
The ASISA Standard on Living Annuities says the customer carries market and long-life risk in full. That tells you where the risk sits. It does not tell you what will happen to any one plan.
In a guaranteed plan, an insurer can take risks that it has agreed to take. The plan may pay for life, pay a set rise each year, or pay a spouse after death. Each feature has a cost. It can change the first income you are shown. You need to see the full terms, not just the first pay.
3. Compare Like for Like
Ask for the same facts on each quote. Use the same age, pay date, spouse choice and income-rise choice. Ask if the pay is level, rises at a fixed rate, or links to an inflation measure. Ask what happens if the first spouse dies. Ask if any money can pass to heirs.
A high first income may look good on its own. It may come with no rise, less spouse cover or no money for heirs. A living plan may show more choice today. It may also leave more risk with you. The aim is a fair match of the full terms.
Check costs in the same way. A living plan can have fund, admin and advice costs. A guaranteed plan may build the cost of its features into the income quoted. A low fee on one page does not settle the choice. Read the fee list and the terms together.
Key Concepts
What a Living Annuity Is
A living annuity is a plan that keeps the money invested while it pays an income. The income is not set for life. It will depend on the money left, market moves, fees and the income you take. You choose an income within the rules and at the times the plan allows.
This can give you room to change the income if life changes. It can also mean more work and more risk. If markets are weak, costs rise or you live a long time, the money may need to do more. No past return or rule of thumb can prove that a given income will last for you.
What a Guaranteed Annuity Is
A guaranteed annuity is also called a life or conventional annuity. You use money to buy an income promise from an insurer. The promise is set by the policy. It may include a level income, a fixed rise, an inflation link, a spouse income or a set pay term after death.
Guaranteed does not mean every risk is gone. It does not, by itself, mean that income will keep pace with prices. It does not mean you can take back the money used to buy the plan. It does not mean that your heirs will get a set sum. Each point depends on the policy you choose.
Worked Example
Illustrative Example: Two Income Jobs
Assume a couple has a R40,000 monthly gap after other income. It sees R28,000 as must-pay bills and R12,000 as costs that can change. This is an example only. It is not a suggested income, a split between plans or a promise of what any plan will pay.
The first task is to check how much of the R28,000 is already met by a pension or other set income. The couple can then compare real insurer quotes for the part that remains. It can also test whether the R12,000 could change in a weak market. Health, age, spouse needs, fees and the wish to leave money to heirs can change the result.
The same R40,000 gap can lead to more than one sound question. A couple with a set pension may need less fixed income. A couple that needs more access to money may place more weight on choice. The numbers do not say which plan, or mix of plans, is right for either couple.
Reality Check
Use real figures before you act. Gather a full budget, the latest fund values, all other income and the actual quotes. Add health costs, debt, help for family and costs that come only once a year. A choice that looks good for one pot of money may not fit the whole plan.
- Which bills must still be paid in a poor market?
- What income is set, and what terms control it?
- What will happen to income when one spouse dies?
- How would higher prices change the budget?
Tax is part of this check. SARS lists annuities and pension income as types of income from which taxable income may be worked out. Your tax will depend on all your taxable income and the rules for that year. This article is not a tax calculation.
Common Mistakes
Choosing on the First Monthly Pay
The first pay may not show the full trade-off. Check income rises, spouse cover, access to money and the risk you still carry. Compare the whole quote.
Assuming Guaranteed Means Inflation-Proof
A set income may stay flat. It may rise by a set rate. It may link to an inflation measure. Ask which one applies and how it affects the first pay.
Assuming Choice Has No Cost
A living plan can give you more room to act. It can also leave more risk with you. Choice is a trade-off, not a free gain.
Assuming What Will Pass to Heirs
What a spouse or heirs may get can differ by plan and policy. Read the death and beneficiary terms. Do not guess from the product name.
What This Framework Does Not Decide
This guide cannot tell you which plan is right for you. Your health, family, age, other money, tax, costs, quotes and time in retirement can change the answer. Use it to ask better questions, not to choose a product or set an income level.
Frequently Asked Questions
Which Is Better: a Living Annuity or a Guaranteed Annuity?
Neither is better for every person. A living annuity keeps more choice and market risk with you. A guaranteed annuity may move set risks to an insurer. The right question is which risks, terms and income needs fit your full plan.
Can You Use Both Types of Annuity?
A mix may be available, subject to fund rules and product terms. It can be explored when different parts of the income need do different jobs. No mix is right for every person.
Can You Lose Money in a Living Annuity?
The money in the plan can rise or fall with market moves. Withdrawals, fees, high prices and a long life can also affect future income and money left. A living annuity does not promise that the money will last for life.
Does a Guaranteed Annuity Always Pay the Same Amount?
Not always. The policy may have level pay, fixed rises, an inflation link, spouse cover or a pay term after death. Read the quote and policy wording to see what applies.
Financial Clarity Review
A practical next step
If this choice is material, gather your budget, fund statements, other-income details, tax facts and real annuity quotes. A Financial Clarity Review can bring these into one planning talk. ClearGauge does not use an article as a stand-in for a personal suitability assessment.
Continue Exploring
- Should You Combine a Living Annuity and a Guaranteed Annuity?
- What Is a Safe Withdrawal Rate for South African Retirees?
- How Does Sequence Risk Affect Retirement Income?
- How Does Inflation Erode Retirement Savings Over Time?
- How Much Do You Need to Retire Comfortably in South Africa?
- How Does Regulation 28 Affect Retirement Savings?
Sources and Further Reading
Primary sources were checked on 2 August 2026 where this article uses time-sensitive retirement, tax or regulatory facts. Recheck policy terms, rules and tax before publication.
- ASISA: Standard on Living Annuities (last updated 30 October 2024)
- SARS: Personal Income Tax
- Financial Sector Conduct Authority: FSP search
Important Disclosure
General information only
This article is general educational and informational material. It is not financial, investment, tax or legal advice. The examples and figures use assumptions that may not fit your own position. They are not promises or forecasts. Before making a financial decision, consider advice that is right for your objectives, financial situation and needs.