Living Annuities and Divorce

Ruvan J Grobler • June 30, 2026

A living annuity is a post-retirement income product available to South Africans who've exited a retirement fund — typically a pension, provident, preservation, or retirement annuity fund. Instead of taking the full benefit as a cash lump sum (subject to the usual tax-free and taxable limits), a retiring member can use some or all of the remaining capital to buy a living annuity from a registered long-term insurer.

A traditional life annuity pays a guaranteed income for life in exchange for handing over the capital permanently. A living annuity works differently — more like a structured drawdown account. The contract sits with the insurer, not a fund, so once the policy is in place the member is no longer part of a retirement fund at all; the relationship becomes a contractual one between annuitant and insurer. The underlying investments also belong to the insurer rather than the annuitant, even though the annuitant chooses how the money is invested, usually from a range of unit trusts or similar portfolios on offer.

 

Income is flexible, within limits — annuitants must draw between 2.5% and 17.5% of the remaining capital each year, reviewable annually. That flexibility is useful, but it cuts both ways: there's no pooling of longevity risk the way there is with a life annuity, so drawdowns that are too high, poor investment returns, or simply living longer than expected can deplete the capital. Whatever's left on the annuitant's death goes to the nominated beneficiaries on the policy. It doesn't form part of the deceased estate, and it isn't divided under intestate succession unless no beneficiary was nominated.

It's this combination — contractual rather than fund-based, insurer-owned assets, flexible but unguaranteed income — that creates particular complications when a marriage ends in divorce.

 

Living annuities vs "pension interest"

It's worth separating a living annuity from "pension interest" as defined in the Pension Funds Act 24 of 1956. Since 1 September 2024, pension interest has meant a member's individual account or minimum individual reserve, calculated under the fund's own rules as at the date of the divorce order — this replaced the older definition that used to sit in the Divorce Act 70 of 1979.

Timing is the key issue. Pension interest only exists while someone remains a member of a retirement fund. Once they retire and use the benefit to buy a living annuity, fund membership ends, and what they're left holding is a contractual right to annuity income — not a fund interest. A divorce order simply can't divide or assign a living annuity to a non-member spouse the way it can an active retirement fund benefit.

 

What the Courts Have Said

The Supreme Court of Appeal has dealt with this directly, in ST v CT 2018 (5) SA 479 (SCA) and again in Montanari v Montanari [2020] ZASCA 48. Both confirm that a living annuity is fundamentally contractual: the insurer owns the underlying assets, and the annuitant's entitlement is limited to drawing income within the permitted range, with anything left over going to nominated beneficiaries on death.

That means a living annuity doesn't form part of the annuitant's estate for accrual purposes the way a share portfolio or property would, and because it isn't pension interest, it can't be divided through a divorce order either.

Montanari did add a useful nuance, though: while the capital itself stays out of reach, the right to future annuity income can still count as an asset for accrual purposes. So the annuity can't be split, but its existence — and the income stream it represents — can still shape the overall settlement. That income is also relevant when maintenance is being worked out, which is reason enough to factor it into broader divorce planning.

 

Why Valuation is Tricky

The legal principles are reasonably settled at this point, but putting a number on the right to future annuity income is a different problem altogether — the courts haven't prescribed a methodology for it. The value depends on drawdown choices, investment performance, life expectancy, and inflation, none of which are fixed. Different actuaries working off the same annuity can land on meaningfully different figures, which makes negotiations harder and can leave clients with mismatched expectations going into a settlement.

 

Conclusion

The annuity itself can't be split or transferred, full stop — this is probably the most common misconception clients arrive with. That doesn't make it irrelevant, though: the right to future income can feed into the accrual calculation and into maintenance discussions. Valuation itself sits outside the scope of financial advice, so where a number is genuinely needed, referral to an independent actuary or other suitably qualified expert must be done.

 

This article is for general informational purposes and does not constitute legal, financial, or actuarial advice.

 

Ruvan J Grobler RFP™ (PGDip Financial Planning)

OORSESE KINDERS EN JOU FINANSIËLE PLAN

By Dr. Riaan Botha • July 30, 2026
Internasionale lughawens in Suid-Afrika is bedrywig gedurende skoolvakansies, want kinders en kleinkinders wat oorsee woon, kom vir hul jaarlikse besoek by oupa en ouma kuier. Dit is opmerklik dat, wanneer die kinders in die ontvangslokale aankom, die glimlagte en opgewondenheid aansteeklik is. Die teenoorgestelde emosies is egter teenwoordig in die vertreklokale twee of drie weke later. Wanneer jy persoonlik deur hierdie emosionele ervarings geraak word, besef 'n ouer hoe hierdie realiteit, wat in baie Suid-Afrikaanse gesinne voorkom, jou familie se finansiële plan beïnvloed. Kom ons bespreek 'n paar aspekte hiervan: Jaarlikse reise na familie wat oorsee woon, is duur en daarom moet daarvoor begroot word. Nie alle kinders wat oorsee werk, het 'n standhoudende inkomste om hul lewenstandaard te befonds nie. Die moontlikheid bestaan daarom dat hulle soms deur hul ouers finansieel ondersteun moet word. Die beplanning van vererwing aan kinders is uniek omdat vaste bates hierdeur geraak word. Dit is byvoorbeeld nie prakties om die familie se woonhuis aan 'n kind wat oorsee woon, te laat vererf nie. Dit is bekend dat familiewelvaart meer as net materiële besittings behels. Daarom behoort familielede met mekaar gesprek te voer oor hoe familiebande sterk gehou kan word nadat vererwing plaasgevind het. Blootstelling aan die daaglikse ekonomiese aktiwiteite van ander lande verbreed die ervaringswêreld van kinders wat oorsee woon. Hierdie nuutgevonde kennis en ervaring kan weer met die Suid-Afrikaanse familielede gedeel word. Dit is bekend dat arbeid in ekonomies ontwikkelde lande, soos die VSA, Australië en verskeie Europese lande, duur is. Daarom moet daar begroot word vir enige arbeid wat oorsee benodig word, veral indien ondersteuningsdienste benodig word. Daar bestaan min twyfel dat die ervaring wat kinders oorsee opdoen, plaaslike finansiële beplanning binne families beïnvloed. Hierdie nuwe werkservarings kan ook 'n positiewe bydrae lewer tot die skepping en behoud van die familie se welvaart.

Offshore Investing: What Your R2 Million Allowance Actually Buys You

By Ruvan J Grobler • July 24, 2026
Is investing offshore just for people who've given up on South Africa? I get some version of this question a lot, and the honest answer is no. It's really just about not keeping all your eggs in one rand-denominated basket. And it got a lot more relevant this year, because in April 2026 the Reserve Bank doubled the Single Discretionary Allowance from R1 million to R2 million per person, per year. That's a meaningful jump, and it's worth understanding properly before you use it. Here's how the allowance system actually works. Every South African resident over 18 gets a Single Discretionary Allowance of R2 million a year. No SARS approval, no tax clearance, you just instruct your bank and off it goes, for travel, gifts, or offshore investing. On top of that sits the Foreign Investment Allowance, up to another R10 million a year, but that one needs a SARS Approval for International Transfer first, which comes off your tax compliance status on eFiling. Between the two, that's R12 million per person, per year, without needing special Reserve Bank sign-off. A couple, or a family with adult kids, can add that up quickly. Worth knowing too, this is different from the rand-denominated offshore funds most people already hold through their local platforms. Those use asset swap or feeder structures, and your allowance never actually leaves the country. Direct offshore investing means the money physically converts to dollars, pounds or euros and sits in an account in your own name, offshore. Different animal, different mechanics. Side note: if you've got a retirement annuity, you already have some offshore exposure, Regulation 28 lets retirement funds hold up to 45% offshore. That's real diversification, but it's locked inside a retirement structure with its own rules on access and estate treatment. Using your personal allowance is a completely separate lever, money you actually hold in your own name, offshore, that you can access, restructure or leave to whoever you want without waiting for retirement age. Who actually uses this in practice? Families with kids studying or working abroad. People planning to retire partly offshore, or just wanting a foreign currency buffer for when they travel. Business owners who've built most of their wealth locally and want a real counterweight sitting outside the country. It's rarely about chasing better returns, it's about not having every asset you own exposed to the same risks at the same time. So why bother with the direct route? Two reasons come up in almost every conversation I have about this: currency, and geography. On currency, if your salary is in rand, your house is in rand and your whole portfolio is in rand, your entire financial life rises and falls with one currency. Holding some of your wealth in hard currency doesn't mean you think the rand is doomed, it just means you're not betting your whole future on one outcome either way. On geography, the JSE makes up less than 1% of total global stock market value. Some of the biggest growth stories in the world right now, in tech, in healthcare, aren't listed here at all. Investing offshore isn't a vote against South Africa, it's just access to the other 99%. Now here's a case worth knowing about, because it shows how badly this can go if someone tries to get clever with the rules instead of just following them. In Singh v South African Reserve Bank, decided by the Pretoria High Court in 2023, an attorney and businessman moved R80 million between local accounts, with about R20 million of it headed for a UK bank account. The problem wasn't the amount, it was how it moved, in R1 million chunks, each one apparently using someone else's Single Discretionary Allowance instead of his own. His bank picked it up and reported it to the Reserve Bank, who placed a blocking order on the remaining R40 million sitting in his account back home. He went to court arguing his bank had approved the transfers, so it must have been fine. The court didn't agree. A bank can't lawfully approve something that breaches exchange control in the first place, and the blocking order stood. If you genuinely need to move more than R2 million a year, that's exactly what the Foreign Investment Allowance is for. It just takes proper paperwork, not creativity.  A few practical things that catch people out: Your allowance resets every calendar year, it doesn't carry over if you don't use it. A clean SARS record matters. Outstanding returns or disputes will delay your approval, and it can take up to three weeks even when everything's in order. Financial institutions want proof of where the money actually came from, especially as the amount grows. Moving a big amount in one go means you're stuck with whatever the exchange rate happens to be that day, that's a separate risk from the compliance side, and worth thinking through. One more thing, since estate planning is where I spend most of my time. Assets held directly offshore, in your own name, usually fall under the estate administration rules of wherever they're held, not just South Africa's. That can mean your executor needs a foreign grant of probate before anything can be dealt with, on top of the local process. It doesn't mean don't do it. It just means the structure deserves as much thought as the decision to invest offshore in the first place. This is general information, not advice tailored to your situation. Ruvan J Grobler FSA® PGDip (Financial planning)