A living annuity is a compulsory annuity purchased from a life insurer on the life of the annuitant with benefits received from a retirement fund. The capital is held on the balance sheet of the insurer and the annuitant may not access the capital. The living annuity pays an income to the annuitant. Currently the law requires the annuitant to draw down an income from the capital of between 2.5% and 17.5% of the capital. Changes to the drawdown rate are made annually on the anniversary date only. The capital value is determined by the value of the linked policy, which is linked to the choice of investments and is influenced by market fluctuations. With a living annuity you have discretion as to how your money is invested as well as decisions around asset allocation. On death, the capital will be available for the nominated beneficiaries.
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