Is the Old Mutual Max Income life annuity a good option for retirement income?

That’s a great question, and the right approach ultimately depends on your personal income requirements, risk tolerance, and whether you need to provide for any dependants.

When retiring from a retirement fund, you typically have two main options:

1. Life annuity (guaranteed income)

A life annuity provides a guaranteed income for life, backed by a life insurer.

Quoted rates differ across providers and are updated frequently based on each insurer’s risk pool and mortality assumptions, so it’s worthwhile comparing offers from reputable insurers with strong balance sheets.

Within a life annuity structure, you can choose from several variations:

Single-life or joint-life cover

If you want your spouse to continue receiving an income after your death, a joint-life annuity may be appropriate. Including a second life reduces the initial income. You can also elect a reduction (for example, 25%) on the first death if the surviving spouse’s expenses are expected to be lower.

Guaranteed periods

You can add a term guarantee – for example, five, 10 or 15 years – ensuring that income continues to a beneficiary if you pass away during that period. This prevents the full loss of the annuity value in the event of an early death. Adding a guarantee will reduce the starting income.

Income escalation options

You can select how your income grows annually:

A fixed escalation (such as 5% per year), or
CPI-linked increases that adjust with inflation.

Your choice here has a meaningful impact on both initial income and long‑term purchasing power.

2. Living annuity

A living annuity allows you to stay invested and choose your income (within regulated limits). You take on the investment and longevity risk but retain control over the portfolio and the ability to leave the remaining capital to beneficiaries.

This option is typically suitable if:

You have sufficient retirement capital to draw at a sustainable rate, and
You prefer flexibility and want to preserve remaining capital for heirs.

You can convert a living annuity into a life annuity later, but not the other way around.

If you’re using discretionary (non‑retirement) funds

If you’re investing discretionary money rather than retiring from a retirement fund, you have access to additional guarantee structures.

Life insurers offer fixed-term or lifetime guaranteed income products with similar features – single or joint life cover, guarantee periods, and fixed or CPI-linked income escalations.

These products function similarly to guaranteed life annuities but with greater structural flexibility because they aren’t governed by retirement fund legislation.

Given the number of variables – required income, dependants, escalation needs, longevity assumptions and investment risk – it’s important to review your personal circumstances holistically before deciding between a guaranteed income solution, a living annuity, or a combination of both.

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