Retirees using investment-linked living annuities who cannot afford to provide a pension for 30 to 40 years should take out insurance against longevity in the form of a guaranteed annuity. This is what one of the country's largest asset managers told the South African Independent Financial Advisers Association conference this week. A couple both aged 65 are expected to survive 23 years, but 50% of people will outlive the average life expectancy, says Shaun Duddy, head of product development at Allan Gray. It makes more sense to provide for an income for a period after which there is only a 10% chance you will be alive. A couple aged 65 must plan for 32 years, Duddy says. For a living annuity to provide an income starting at 4% of your capital, and increasing by inflation each year for 30 years, you need to earn a real (after-inflation) after-fees return of 2.2%, he says. If you are drawing an income at a higher rate, starting at, for example, 7%, you will need a higher real return -...

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