Retirement Capital Surges to R911.7bn as South African Living Annuities Reshape Savings Ma

R911.7 billion. That single figure, representing retirement capital held in South African living annuities at the end of 2025, tells the story of a market that has grown sixfold in fourteen years and now anchors the financial security of hundreds of thousands of households.

The Association for Savings and Investment South Africa (Asisa), which represents the major financial service providers administering and investing these assets, released data showing that living annuity policyholders withdrew an average of 6.6% of their invested capital as income in 2025. That rate sits within what industry observers consider prudent territory. More striking is the direction of travel: average withdrawal rates have declined steadily since 2011, when they peaked at 7%, even as electricity, water, food, fuel and education costs rose substantially over the same period and higher interest rates compressed household budgets.

Additional reference context is available at https://www.moneyweb.co.za/news/south-africa/despite-high-living-costs-retirees-cut-back-instead-of-dipping-into-savings/.

Economic theory would predict the opposite. Rising living costs should push retirees to extract more from their investments. Instead, they pulled back.

Jaco van Tonder, deputy chair of Asisa’s marketing and distribution board committee, attributed this behaviour to a deliberate choice among living annuity investors to preserve capital by cutting spending rather than lifting withdrawal rates. The implication is unambiguous: retirees fear depletion more than they fear present-day financial constraint.

The capital at stake is substantial. At year-end 2025, R911.7 billion sat across 579,205 living annuities, up from R155.2 billion held in 278,000 policies in 2011. New inflows reached a record R104.5 billion in 2025, compared with R23.9 billion fourteen years earlier. The product’s appeal lies in its flexibility: investors set their own annual income withdrawal anywhere between 2.5% and 17.5% of remaining capital, with money staying invested and exposed to market returns. The trade-off is that income is not guaranteed. Withdraw too aggressively, or suffer poor investment performance, and capital can be exhausted before death.

That structural risk is precisely what appears to be shaping investor behaviour.

The distribution of capital across withdrawal bands reinforces the picture. At year-end 2025, 45% of total living annuity assets (R410.2 billion) were subject to annual withdrawal rates of 2.5% to 5%, with a further 27.3% (R248.9 billion) at rates between 5% and 7.5%. Nearly three-quarters of all living annuity capital was therefore deployed at withdrawal rates of 7.5% or lower, a concentration that reflects a market-wide preference for capital protection over income extraction.

Van Tonder noted that annual drawdown rates between 4% and 5% in the first decade of retirement, and below 8% in later years, are generally considered sensible, offering retirees “a high probability of preserving their purchasing power for their lifetime.” By that measure, the 2025 data suggests the majority of South African living annuity investors are, at least for now, on the right side of the line.

Meanwhile, the record inflow figure of R104.5 billion signals that the living annuity market is still attracting fresh capital at pace, even as existing policyholders tighten their drawdowns. For asset managers and financial service providers administering these funds, that combination, growing assets under management and restrained withdrawals, is commercially favourable. Capital stays invested longer, generating fees and compounding returns.

Asisa interprets the 6.6% average withdrawal rate as sensible given the economic environment. The broader pattern, retirees accepting reduced current consumption to protect against the risk of outliving their savings, reflects the structural vulnerability many South African retirees perceive in their financial positions. Whether that anxiety is well-calibrated or excessive depends heavily on what investment returns and inflation do next, a question the 2025 data cannot yet answer.