Why life annuities need a fresh conversation

Retirement planning changes along with the markets, legislation and new product design, but one truth has never changed: retirees need income security that will last for the rest of their lives. In a climate marked by geopolitical tension, volatile market swings and shifting interest rates, this need has only become more pronounced. For financial advisers, helping clients navigate that uncertainty requires a calm, evidence-based approach, especially when emotions rise alongside market noise.

That foundation of income certainty is exactly where Deane Moore, CEO of Just SA, begins. “Pensioners need income security for their life… to cover the essential expenses,” he notes. “The discretionary spend is something else, but they need to be able to cover the essential spend.” And the most cost-effective way to secure that essential income, he argues, remains the traditional life annuity. Through the power of pooling longevity risk within insurers such as Just SA, retirees effectively access income priced on the average lifespan of a community rather than the uncertainty of their individual lifetimes. “If you say, I’m an island and I’m going to look after myself, you can’t count on dying in your mid-80s,” Moore explains. “You need to make sure you’ve got money to live to your mid-90s or even 100.”

Yet, today’s retirees are confronting a very different environment. Balanced funds delivered two consecutive years of more than 20% returns, and then lost 10% in the first two weeks of March as war broke out in the Middle East. Long-term interest rates fell 4,5% over 2024/25, then rose 1% in a short space of time in March 2026. South Africa’s inflation rate fell to 3%, but is expected to rise above 3,5% with higher oil prices. When market performance is strong and annuity rates reduce, clients become unsure about the right time to secure guaranteed income. Many, understandably, wonder whether a lower annuity rate means they have ‘missed the moment’.

Moore encourages advisers to shift that perspective. Retirees, he says, should focus on the overall income they can secure, not the rate in isolation. “People think they need to try and time this perfectly,” he explains. “But the amount of guaranteed income you can buy is far more stable than the markets. It drifts up and down, it doesn’t crash 20% overnight.” Usually, when markets rally and asset values increase, long-term interest rates fall and the cost of buying guaranteed income rises. Over time, these effects largely offset each other. The result for clients invested in a balanced fund is the amount of guaranteed income they can purchase with their available assets remains far steadier than most investors realise.

This perspective becomes even more important during periods of global uncertainty. “Bank the rally,” Moore advises. “Don’t ride the rollercoaster. You certainly don’t want geopolitics to define your retirement.” The point is not political, it is practical. Letting short-term volatility steer long-term financial decisions has repeatedly led investors astray.

For Moore, one message should anchor every adviser-client conversation: the value of guaranteed income has not changed. Peace of mind still matters. Securing the portion of income needed for essential expenses remains the most prudent path, regardless of market cycles. And for retirees, that peace of mind is worth more than another year of unpredictable market returns.

Blending, behaviour and the new frontier 

If the first major shift in the annuity market was the growing availability of with-profit annuities, and the second was underwriting for enhanced income, the third, and perhaps most transformative, has been the arrival of blending. Introduced around 2017, blended strategies allow retirees to hold both a life annuity and a living annuity within a single structure. For advisers, this began opening doors that simply did not exist a decade ago.

Blending has not yet reached its full potential. Many advisers are still exploring how far they can push the mix: how much security can be delivered through the life annuity portion, and how much growth can come from the living annuity portion? Even now, the industry is in an early phase of experimentation. But what’s clear is that blending removes the all-or-nothing pressure from the retirement decision. Clients no longer need to commit exclusively to one path at the point of retirement – they can adapt their structure over time.

This flexibility is only growing. As Moore notes, innovation continues to unlock new levers for advisers to use when tailoring retirement plans. He describes longevity itself as a form of ‘investment return’ – the longer a person lives, the more valuable the guaranteed income from a life annuity becomes. This fundamental truth opens space for more creative structuring by astute advisers.

One example of innovation is the JuLI Advance product, launched to take advantage of a specific market anomaly. By capping future investment returns at a high level – a smoothed average 15% per annum over six years – it enables significantly higher starting incomes on with-profit annuities. For most retirees, achieving a 15% annualised return for six consecutive years would feel more than satisfactory; the cap therefore sits well above realistic long-term expectations. While interest rates and market conditions influence how attractive such innovations appear at any given moment, advisers are increasingly looking at with-profit annuities to maintain market exposure while securing a guarantee that income can never reduce.

The timing trap

Of all the considerations that shape an annuity decision, timing is often the most misunderstood. Clients tend to believe there is a ‘right moment’ to secure a guaranteed income – typically when rates appear high. But Moore cautions that timing often distracts both clients and advisers from the real question: what does the client need?

If a retiree wants to remain invested in markets because they believe growth will continue, even if they fear imminent downside, a with-profit annuity can be an elegant bridge. It keeps them invested in balanced funds, while placing a floor under their income. That floor never moves down, and income increases continue to follow the performance of the underlying balanced portfolios, with smoothing to dampen volatility. For retirees who are anxious about sharp drawdowns but not yet ready to leave the market, this annuity structure delivers both participation and protection.

A common misconception is that buying a life annuity forces a retiree into government bonds. That isn’t true. With-profit annuities, especially, allow clients to retain equity exposure without the risk of declining income. In this way, the products remove an entire layer of stress, particularly during periods of global tension or uncertainty.

Rethinking legacy

Legacy planning presents another persistent misunderstanding. Many clients assume life annuities eliminate the possibility of leaving anything to dependants. Moore is quick to counter this. A life annuity provides an income legacy that can be fully tailored. Clients can add a spouse or second life benefit at any level (from full continuation to a reduced percentage), protect dependent children for a specified minimum period, and shape the flow of income to mirror their family’s financial needs. A living annuity, by contrast, passes on capital rather than income. Both forms of legacy have value, and many retirees will need both.

Blending again becomes the natural solution: secure essential and dependent-related income through a life annuity component, while preserving capital in the living annuity portion for intergenerational transfer.

Dispelling harmful myths

Two key misconceptions often derail sound retirement decisions. The first is the belief that when it comes to life annuities, the insurer ‘keeps the money’ if a retiree dies early. In reality, this is the very mechanism that allows annuity income to remain sustainable for others in the pool. The second misconception is that delaying a life annuity guarantees a better outcome because the annuity rate rises with age. While the rate does rise, the income forgone in the interim typically outweighs any perceived benefit from delaying. Moore notes that analyses show retirees in their 60s are better off in roughly 80–90% of cases when they purchase earlier rather than waiting five years.

Looking ahead

Market cycles come and go, political winds shift, and global tensions ebb and rise. What does not change is the underlying need, and that’s secure income for life. Moore believes this should remain the anchor point for advisers in any environment. When markets run hot, discussions about guaranteed income often fall from prominence – yet, these are precisely the times when retirees should pay the most attention.

“Peace of mind,” he says, “is what doesn’t change.” Securing that certainty allows retirees to read the news with interest, not anxiety. And in a world where unpredictability seems increasingly normal, that security may be the most valuable return of all.