In a complex world, very little, if anything can be viewed in black and white. Especially regarding retirement.
In the past decade, the restrictions imposed by Regulation 28 of the Pension Funds Act, have worsened the retirement savings outcomes for many South Africans. The main reason is that there is an offshore exposure limit of 30% for retirement or pension investment vehicles, leaving the returns of investors and to-be retirees vulnerable and exposed to the lacklustre performance of the local market, the JSE.
The good news is that there is an alternative option to consider to be freed from the restrictions of Regulation 28 and gain greater control over retirement investments. The solution is simple – retire out of retirement annuities or pension funds and purchase a living annuity with the proceeds. This investment option has far fewer restrictions on retirement savings – notably the fact that it allows for 100% offshore exposure.
Below is a table comparing the returns of the past 15 years from the JSE Index, with the returns of that of the MSCI World Index and the S&P 500 Index. The differences are sobering, to say the very least…
10 years:
| Start Date | 01 Feb12 |
| End Date | 01 Feb 22 |
| Initial Investment | R100 000 |
| Index | Investment Value February 2022 |
| FTSE/JSE All Share Total Return (ZAR) | R216 894 |
| MSCI World Total Return (ZAR) | R602 335 |
| S&P 500 Total Return (ZAR) | R675 535 |
| FTSE/JSE All Share Total Return (ZAR) | MSCI World Total Return (ZAR) | S&P 500 Total Return (ZAR) | |
| Current Investment Value | 216 894 | 602 335 | 675 535 |
| Annual Returns in ZAR | 8.05% | 19.67% | 21.05% |
Source: B
When it comes to investment planning for retirement the two main phases are ‘pre-retirement’ and ‘post retirement’. The big misconception is the middle. The majority of South Africans view their retirement annuity as strictly ‘pre-retirement’, and a living annuity as strictly ‘post retirement’. Thus, they assume that they must first retire from their employment or work in general, for many at the age of 60/65, and then once each of these two conditions are both met simultaneously, they can retire out of their retirement annuity and purchase a living annuity. Simply, it does not have to be this way…
The big misconception lies in what is defined as the retirement age in South Africa, which is fortunately 55. Once you have reached the age of 55, regardless of whether you are employed or not, or whether you intend to retire in the short-term or not, you are eligible to retire out of a retirement annuity and use the proceeds to invest in a living annuity.
As mentioned earlier, the biggest drawcard for living annuities is that they are not governed by Regulation 28, and thus have far fewer restrictions, in particular the option to invest up to 100% offshore. The benefit of retirement annuities – actively promoted by especially large insurers – is the tax benefits it offers as contributions made are tax deductible, at least up to certain limits, whilst earning an income.
Considering the high tax burden on income earning South Africans, tax benefits should never be ignored. There is a simple solution – investors can retire out of a current retirement annuity at 55, use the proceeds to purchase a living annuity, while at the same time can open a new, ‘smaller’ retirement annuity to contribute to until age 65, and take advantage of the tax cuts offered by retirement annuities whilst still working post 55.
Once the investor officially retires, say at 65, they can once again then retire out of the second, smaller retirement annuity, and add the additional proceeds to the existing living annuity. Thus, for the years post 55, whilst you are still working, you can look to maximise the growth of your retirement funds.
The flexibility this option offers is an important point to consider for retirement planning, especially for those who want more control over their retirement savings, greater access to other markets, and more freedom in deciding on where to invest their hard-earned money.
As with all investment decisions or financial planning strategies, it is advisable to navigate it with the assistance of a qualified, experienced advisor, who can offer the appropriate financial advice best suited to your personal circumstances. Read more about planning for retirement.
Megan joined the Brenthurst Wealth team in March 2026 as an Administrative and Fiduciary Services Assistant at our Val de Vie Office in the Western Cape. Prior to joining Brenthurst, Megan gained three years of experience in the retail sector, where she developed management and client service skills.
I obtained my National Diploma in Financial Information Systems from the Cape Peninsula University of Technology in 1999 and have worked in the wealth management industry since January 2000. Over the years, I have gained extensive experience in various roles, including Portfolio Manager Assistant, Planner Assistant, and Paraplanner.
Esmarelda Isaacs-Andreas joined the Brenthurst Wealth Stellenbosch office in October 2025, taking on the dual role of Receptionist and Fiduciary Administrator.
I obtained my National Diploma in Financial Information Systems from the Cape Peninsula University of Technology in 1999 and have worked in the wealth management industry since January 2000. Over the years, I have gained extensive experience in various roles, including Portfolio Manager Assistant, Planner Assistant, and Paraplanner.
Ashley joined Brenthurst Wealth in January 2025 as Office Administrative Assistant and Receptionist for the Stellenbosch Office.
René Heystek joined Brenthurst Wealth in November 2023, as receptionist and administrative assistant in the newly established George/Garden Route office.
Michelle Heystek has built a career in the financial services over the last two decades, after obtaining her B.Com degree in Financial Management in 2005. Once she joined Brenthurst in 2006, she continued her academic journey, obtaining her Certificate in Wealth Management from INSETA in 2007, followed by a Postgraduate Diploma in Financial Planning from the University of the Free State. In 2008, she earned the Certified Financial Planner (CFP®) designation.
Anelle joined Brenthurst Wealth as a Receptionist and Administrative Assistant to Brian Butchart in the Cape Town office in December 2023. She has a wealth of knowledge from working as a liaison between Financial Advisers and clients at TMA and Absa Investment Management Services (Aims) since 1998. She obtained her B. com degree from the University of Port Elizabeth in 1997.
ADMITTED ATTORNEY | FINANCIAL PLANNER & HEAD OF BRENTHURST FOURWAYS
Sanet was appointed in April 2020, joining our Cape Town team as an Executive Administration Assistant to Renee Eagar. She has been in the financial services industry since 1990. Her previous experience includes positions at Sanlam, BJM and ABSA. She spent her last 12 years working at Alexander Forbes Private Client Wealth as a Senior Wealth Management Assistant. She has received numerous accolades over the years which include but not limited to, Alexander Forbes Client Service Excellence – Silver award in 2014,2015 and 2017. Sanet has also obtained her Certificate in Wealth Management (NQF 5) in 2012 and achieved “Best Student of the Year” from Moonstone.
Maria Smit is a Certified Financial Planner® with over 10 years of experience in the financial planning industry.
