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CityPress - - Business - VER­DICT: see New prod­uct).

These an­nu­ities pay you out on the same ba­sis as a guar­an­teed an­nu­ity, but the dif­fer­ence is they are riskrated in­di­vid­u­ally, so a re­tiree in poor health could re­ceive a big­ger an­nu­ity in re­tire­ment than some­one of the same age who is in good health (

“Bear in mind that if you choose a life or guar­an­teed an­nu­ity, you are go­ing to re­ceive a lower monthly in­come than you would re­ceive on an Illa,” warns Dolya.

The big­gest ben­e­fit of a life an­nu­ity is that the life as­sur­ance com­pany bears all the risk and you are guar­an­teed an in­come un­til you die.

New prod­uct

en­hanced an­nu­ities have been avail­able in South Africa for at least six years, only one life as­surer has of­fered them to date: Para­mount Life. How­ever, a new com­pany in the mar­ket, Just Re­tire­ment, which is a wholly owned sub­sidiary of Just Re­tire­ment, based in the UK, re­cently launched in South Africa of­fer­ing only en­hanced an­nu­ities.

Chief ex­ec­u­tive Deane Moore says an en­hanced an­nu­ity will typ­i­cally pay a re­tiree be­tween 10% and 30% more in re­tire­ment than a stan­dard guar­an­teed or life an­nu­ity, depend­ing on the client’s risk as­sess­ment. Just Re­tire­ment has a stan­dard ques­tion­naire that asks your fi­nan­cial ad­viser to iden­tify whether you suf­fer from a heart con­di­tion, or ill­ness such as di­a­betes, or if you have suf­fered a stroke. This in­for­ma­tion is then used to cal­cu­late your in­di­vid­ual life ex­pectancy, and your an­nu­ity pay­out is de­ter­mined based on the life ex­pectancy cal­cu­la­tion. In other words, the un­health­ier you are, the big­ger your monthly pay­ment will be. Moore says if you live be­yond the guar­an­teed pe­riod, the pol­icy will con­tinue to pay out un­til you die.

Just Re­tire­ment has the fol­low­ing three prod­ucts in its port­fo­lio:

An in­fla­tion-linked guar­an­teed an­nu­ity, which in­creases in line with in­fla­tion each year.

A guar­an­teed an­nu­ity that in­creases by a fixed per­cent­age each year, up to a max­i­mum of 10%.

A guar­an­teed an­nu­ity that pays you a fixed amount each month through­out your re­tire­ment. Note that this op­tion car­ries an in­fla­tion risk be­cause, as the years go by, the amount of money you are re­ceiv­ing each month will be worth less in terms of buy­ing power.

An en­hanced an­nu­ity makes sense if you are in poor health when you re­tire and do not ex­pect to live longer than 10 to 15 years. The in­fla­tion-linked guar­an­teed an­nu­ity prod­uct makes the most sense be­cause it will keep pace with in­fla­tion each year.

As your health is rated in terms of the amount you would re­ceive as an in­come, a per­son in poor health would re­ceive a higher in­come with an en­hanced an­nu­ity than an or­di­nary guar­an­teed an­nu­ity. It would be worth it, how­ever, to get com­par­a­tive quotes to en­sure you are re­ceiv­ing the best pos­si­ble in­come.

A per­son in poor health with a rea­son­able amount of re­tire­ment fund­ing (in ex­cess of R1.5 mil­lion) could also con­sider a liv­ing an­nu­ity, as any funds still re­main­ing upon death would be left to one’s ben­e­fi­cia­ries. Be aware that a liv­ing an­nu­ity also car­ries the risk of mak­ing poor in­vest­ment choices, and the risk of draw­ing down too much money and run­ning out of funds pre­ma­turely.

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