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Two new analyses show that South African retirees invested in living annuities risk running out of money, with many already living on half the income they enjoyed six years ago. This heartbreaking situation will be exacerbated by the fact that local markets are likely to produce low returns over the next 10 years. How did we get here? A confluence of forces in the 1980s and 1990s led employers to largely abandon traditional defined benefit pension schemes in favour of defined contribution pension schemes. At the time, a long bull market was producing high real returns relative to the pension values assumed by actuaries. Defined contribution schemes were welcomed as they gave the benefit of these returns to the members rather than the employer. Along with this was freedom of choice as to how members’ contributions would be invested while saving for retirement. Again, this was welcomed with open arms. Choice was also introduced in the post-retirement space in the form of living annuit...

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