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)

Why diversification matters - even when the future looks exciting

By PJ Botha • November 3, 2026
In conversations with people, and increasingly in the media, I hear the same message: “Just put everything in the S&P 500. Over time, it will all balance out.” There is sound reasoning behind investing in a broad share index over several decades. But that advice can overlook something important: your investment horizon and your ability to stay invested when markets fall. Even investors with decades ahead may need some of their money much sooner. During the dot-com crash, the S&P 500 fell approximately 49% from its peak in 2000 to its low in 2002. Imagine watching an investment of 1 million fall to roughly 510,000, excluding dividends and currency movements. It is easy to say you would remain invested; experiencing it can feel very different. Even the eventual winners suffered. Amazon’s share price fell approximately 94% between December 1999 and September 2001. An investment of $100,000 would temporarily have been worth around $6,000. Amazon survived and eventually flourished, but other businesses did not: Webvan and eToys entered bankruptcy in 2001, with shareholders facing the loss of their entire investment. Recovery is possible for a broad market; it is never assured for an individual company. If you need to draw an income, fund a major expense or simply find the losses unbearable, you may be forced—or tempted—to sell before markets recover. Different markets followed different paths. While US shares struggled, the JSE All Share initially rose approximately 52% between March 2000 and May 2002, before falling around 37% by April 2003. At that low, it was approximately 4% below its March 2000 starting level, excluding dividends. South Africa provided diversification, but its market still experienced a substantial decline along the way. Bonds also played an important role. Over the three calendar years from 2000 to 2002, US 10-year Treasury bonds delivered a cumulative return of approximately 42% in dollars, while South Africa’s All Bond Index returned approximately 63% in rand, including reinvested income. These are full-period returns, rather than peak-to-trough figures, but they show how different asset classes can support a portfolio when shares struggle. The Rand added another layer. It started 2000 at approximately R6.12 to the dollar and weakened dramatically, briefly reaching around R13.85 in December 2001. It subsequently recovered, briefly revisiting roughly R6.10 in December 2003 and trading around those levels again in July 2004. Rand weakness initially cushioned offshore losses for South African investors; the subsequent strengthening worked in the opposite direction. Moving offshore after a sharp currency decline can therefore introduce its own risks. Artificial intelligence (AI) is creating exciting opportunities today. The internet boom offers a useful reminder: a technology can change the world without every investment in it delivering a good return. The price paid and the expectations built into that price still matter. This does not mean a similar crash is imminent, or that investors should avoid the S&P 500. It means that an investment can be a useful part of a portfolio without being the right place for all your money. At Bovest, we build portfolios around your goals, income needs and investment horizon. Diversification across companies, sectors, countries, currencies and asset classes cannot prevent every loss, but it can reduce dependence on one outcome. The best portfolio is one that supports your financial goals—and that you can live with when markets become uncomfortable.

Die wysheid wat nie afgelaai kan word nie

November 3, 2026
Die spoed en omvang waarteen inligting en ontledings in ons moderne tyd aangebied word, is verstommend. Ons hoef nie meer ure in biblioteke te sit om navorsing te doen nie. Die internet en kunsmatige intelligensie kan ingewikkelde onderwerpe verduidelik, uiteenlopende menings saamvat en ontledings aanbied. Hierteenoor leef ons in een van die mees problematiese tydperke van die wêreldgeskiedenis – geo-politieke verhoudinge is kompleks en gespanne en Westerse lande ervaar uiteenlopende intense uitdagings. Help al die inligting en ontledings ons noodwendig om beter besluite te neem? Ek dink nie so nie. Daar is een vermoë wat die internet nie kan bied nie - dit is menslike wysheid. Die Griekse filosoof, Socrates, sê hoe slimmer ons word hoe meer besef ons hoe min ons eintlik werklik weet: “Ek weet dat ek nie weet nie”. Miskien is dit die eerste teken van wysheid om nie deurgans antwoorde te hê nie, maar om eerder beter vrae te vra. Wysheid is nie om alles te weet nie, maar om te weet wat werklik saak maak. Dan kom ons weer terug by die kernvraag wat ons deesdae moet vra: “Maak die beskikbaarheid van kennis ons noodwendig wyser.” Nie noodwendig nie. Kennis gee vir ons feite en ontledings; wysheid vra egter meer. Dit vra besinning, oordeel, perspektief, selfkennis uit ervaring, en die vermoë om te onderskei tussen wat ons kan doen en wat ons behoort te doen. ‘n Mens kan boeke oor verlies lees, maar die dood van ‘n geliefde leer jou iets wat geen ontleding volledig kan oordra nie. Daar is ook ‘n oënskynlike verband tussen ouderdom en wysheid Ouderdom waarborg nie noodwendig wysheid nie. Sommige mense word oud sonder om besinnende vrae te vra en sonder om ooit uit hul foute te leer. Ervaring, daarteenoor, wat gekoppel is aan nadenke en selfondersoek, bring ‘n soort insig wat nie bloot uit die versameling van feite ontstaan nie. In die Bybelse boek, Spreuke, word wysheid in ‘n groter morele raamwerk geplaas. Kennis behoort met nederigheid, insig en verantwoordelike vermeng te word. Miskien is dit die paradoks van ons tyd: ons beskik oor al hoe meer antwoorde, maar die belangrikste vrae bly op ‘n menslike vlak. Wat is reg? Wat is genoeg? Wanneer moet ek swyg? Hierdie vrae vra meer as inligting. Hulle vra lewenservaring en insig. Die uitdaging van ons tyd is dus nie om meer kennis te versamel nie, maar om te leer hoe om dit wys te gebruik. Want kennis kan ons help om die wêreld te verander. Wysheid help jou om te besluit watter verandering die moeite werd is. Die kern van ons samelewinguitdagings in die tydperk waarin ons lewe is in werklikheid ‘n spanning tussen ons tegnologiese vermoëns en ons menslike vermoë om sinvol te oordeel. Ons het vandag dalk beter instrumente as ooit tevore, maar dit beteken nie dat ons noodwendig beter besluite neem, meer begrip vir mekaar het of gelukkiger saamleef nie. Hoe meer ek van die lewe leer, hoe minder klink absolute sekerheid na wysheid. Geskryf deur Koos van die Waterberge vir Bovest