Despite high living costs, retirees cut back instead of dipping into savings

Although cost-of-living pressures came to a head in 2025, South African retirees are increasingly not opting to withdraw more money to fund their lifestyles.

Instead, they are spending less and protecting their savings, as they are more worried about running out of money in old age than having extra cash today.

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This is according to statistics from the Association for Savings and Investment South Africa (Asisa), which show that living annuity policyholders withdrew, on average, 6.6% of their invested capital as income in 2025.

Asisa is a body that represents major financial service providers that administer and invest retirement and savings assets.

Making savings last

A living annuity is a retirement product where you invest your pension savings and choose your own annual income. Unlike a traditional annuity that guarantees a fixed income for life, a living annuity keeps money invested, and you choose how much income to withdraw each year – between 2.5% and 17.5% of your remaining capital.

The catch is that your income is not guaranteed: if you withdraw too much or your investments perform poorly, you risk running out of money in old age.

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According to Asisa, average withdrawal rates have been steadily declining since 2011, when they reached a high of 7%.

Since then, the cost of living has increased across the board, with the prices of electricity, water, food, fuel and education all rising significantly. Higher interest rates have also placed further pressure on household budgets.

The expectation would be that these pressures would lead retirees to increase their withdrawal rates to fund their lifestyles, but the opposite is happening.

Jaco van Tonder, deputy chair of Asisa’s marketing and distribution board committee, said living annuity investors were instead choosing to preserve their capital by reducing spending rather than increasing their income through higher withdrawal rates.

Read: Markets and investor caution see annuity withdrawals hit record low

Retirees in South Africa had R911.7 billion of their retirement savings invested in 579 205 living annuities at the end of 2025.

The number of living annuities does not necessarily represent the number of policyholders, as individuals may have more than one living annuity.

The living annuity industry has grown significantly in recent years. At the end of 2011, 278 000 living annuities were in force, with assets under management of R155.2 billion.

New inflows reached a record in 2025, with retirees committing R104.5 billion to living annuities, compared with R23.9 billion in 2011.

Source: The Association for Savings and Investment South Africa.

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Cautious drawdowns

Asisa views an average withdrawal rate of 6.6% in 2025 as sensible.

According to Van Tonder, annual drawdown rates of between 4% and 5% in the first decade of retirement, and below 8% in later retirement years, are generally considered prudent, giving retirees “a high probability of preserving their purchasing power for their lifetime”.

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He said it was encouraging that 45% of total retirement savings (R410.2 billion) held in living annuities at the end of 2025 were subject to annual withdrawal rates of 2.5% to 5%, followed by 27.3% (R248.9 billion) at withdrawal rates of 5% to 7.5%.

“This means that almost three quarters of living annuity assets are subjected to annual drawdown rates of 7.5% and lower,” said Van Tonder.

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