Living annuity rules in South Africa
General information about the rules, not financial advice. We do not recommend any provider, fund or drawdown rate.
Drawdown limits
Government Notice 290 of 11 March 2009 (Gazette 32005) sets the annual income at no less than 2.5% and no more than 17.5% of the value of the assets, for living annuities bought on or after 21 February 2007. Contracts from before that date had limits of 5% to 20%.
The anniversary date
You choose your rate when the annuity starts and may change it only once a year, on the anniversary date. The rand limits are recalculated on that date from the new value.
Cashing in a small living annuity
From 1 March 2026 you can commute (cash in) a living annuity whose value is below R150 000, up from R125 000. The payout is taxed on the retirement lump sum table.
Tax on the income
The income is taxed like a salary: it is added to your other taxable income and taxed on the normal tables. From 65 you get the secondary rebate (R9 765) on top of the primary rebate (R17 820), and from 75 the tertiary rebate (R3 249). The provider deducts PAYE, but if you have more than one income source you may owe more on assessment.
Risk
The income is not guaranteed. If investment returns are lower than your drawdown for long periods, the value and the income fall. See what different rates mean in the living annuity calculator.
Frequently asked questions
Can I draw less than 2.5%?
No. 2.5% is the minimum annual income for contracts started on or after 21 February 2007.
Can I change my rate in the middle of the year?
No. Notice 290 lets the annuitant choose a new rate only on the anniversary date of the contract.
Does the provider deduct tax?
Yes, the provider deducts PAYE from each payment. If you have other income too, the combined tax may be higher, and the balance is settled on assessment.