MONEY CLINIC | Is it worth investing in a living annuity during the time of Covid-19?

play article
Subscribers can listen to this article
Close up of unrecognizable woman using calculator while going through bills and home finances.
Close up of unrecognizable woman using calculator while going through bills and home finances.

A Fin24 reader heading into retirement seeks the opinion of an expert on investing during the uncertainty of Covid-19.

He writes:

What is your opinion regarding a living annuity in the circumstances in which we find ourselves? I am retiring at the end of this month. 

Debra Slabber, Business Development Manager at Morningstar Investment Management South Africa responds:

Markets have sold off quite aggressively over the past quarter. The Reserve Bank also cut interest rates by 200bps in a very short amount of time, making cash not as attractive as it used to be. The world is an uncertain place at the moment, and facing retirement is daunting and uncomfortable for most people. When thinking about your living annuity portfolio there are a couple of key factors to keep in mind. It is important to have a portfolio that:

• On average, exhibits low levels of volatility. Living annuity clients can’t stomach large drawdowns in market downturns.

• Has a healthy a yield component. We are fortunate in South Africa that SA Government bonds currently have some of the highest real yields on offer globally. 

• Has a diversified stream of return drivers, including income assets (bonds and cash) and growth assets (S.A. equities) as well as a meaningful exposure to global assets (remember in a Living-Annuity portfolio, clients are not restricted to Regulation 28).

• Is cost-effective. The danger to investors at this point in the cycle, having experienced anaemic to no returns for the past five years, is to de-risk and move down the risk spectrum into cash and bonds. If your investment horizon and income requirements exceed three years, it is important to have exposure to growth assets, to ensure long term capital growth.The Morningstar Moderate Income Portfolio, for example, was built specifically with these factors in mind. From a valuation perspective, some asset classes are cheaper than what they were and this makes a great entry point into markets. With the right portfolio composition, we are confident that clients can enjoy a reasonable income withdrawal without eroding capital over the long term.It is recommended that you speak to your financial adviser to assist you in making an informed decision when it comes to your personal finances.

Questions may be edited for brevity and clarity.

  • Have a money problem that needs solving? Fin24 can help! Send your question to

Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers. Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.

Get the biggest business stories emailed to you every weekday.

Go to the Fin24 front page.

We live in a world where facts and fiction get blurred
In times of uncertainty you need journalism you can trust. For only R75 per month, you have access to a world of in-depth analyses, investigative journalism, top opinions and a range of features. Journalism strengthens democracy. Invest in the future today.
Subscribe to News24
Rand - Dollar
Rand - Pound
Rand - Euro
Rand - Aus dollar
Rand - Yen
Brent Crude
Top 40
All Share
Resource 10
Industrial 25
Financial 15
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Voting Booth
In light of the recent looting, do you think a basic income grant is the right approach to deal with SA’s hunger and poverty problems?
Please select an option Oops! Something went wrong, please try again later.
It will go a long way in helping fight the symptoms of SA’s entrenched inequality, especially for those who are starving right now
20% - 1492 votes
SA’s problems are complex, and we instead need to spend that money on building and growing our economy, which will help the country in the long run
31% - 2312 votes
All grants are a problem as they foster a reliance on handouts
49% - 3652 votes