David and Elaine built their careers on their own terms — a boutique consulting firm, no corporate employer, no pension scheme defaults. For three decades, they made deliberate decisions about where their capital went and how hard it worked.
Retirement didn’t change their approach. They came to us not because they were lost, but because they wanted to get the income structure right from the start. They had R30 million across retirement annuities and an offshore portfolio, a clear income need, and the sophistication to want to understand why each decision was being made, not just what it was.
This case study covers how we structured their retirement income, what drove each decision, and what it costs — including a direct comparison to what the same service would cost under a standard AUM model.
Client Profile
| Detail | |
|---|---|
| Names | David and Elaine |
| Ages | Mid-60s |
| Background | Owners of a boutique consulting firm (recently sold) |
| Retirement annuities | R15 million (combined) |
| Offshore portfolio | USD 850k (~R15m ZAR equivalent) |
| Total balance sheet | ~R30 million |
| Monthly income target | R75,000 net (~R900,000 p.a.) |
| Annual flat fee | R60,000 p.a. |
The Situation
Without employer pension defaults to fall back on, David and Elaine had always managed their retirement savings themselves — or with minimal guidance. Their RAs had accumulated through deliberate contributions over time, and their offshore portfolio had been built gradually through a combination of personal initiative and SARB allowances. By the time they came to us, the capital was there. The structure wasn’t.
The decisions at retirement are irreversible in ways that mid-career investment choices aren’t. Choosing how much of an RA to convert into a life annuity versus a living annuity — and on what terms — can’t be undone. Getting the offshore structure wrong from a tax and estate planning perspective can cost more over time than a year of bad investment returns. These aren’t decisions that suit a standard platform recommendation.
They also needed someone to hold the overall picture. Their RA was held with one provider, the offshore portfolio with another, and their estate planning had never been updated to reflect either. The integration work was as important as any individual investment decision.
Income Structure: Three Pools, Three Purposes
We designed their retirement income around three distinct pools of capital — each with a different mandate, risk level, and purpose. Together, they deliver a projected gross income of approximately R1.075 million per year against a lifestyle target of R900,000 — providing breathing room for inflation, currency movement, and years when not all drawdowns are required.
| Income source | Capital | Annual income (start) | Key features |
|---|---|---|---|
| Life annuity (Elaine’s RA) | R5 million | ~R375,000 | 7.5% starting rate, 6% annual escalation, 75% continuation to David |
| Living annuity (David’s RA) | R10 million | ~R400,000 (4% p.a.) | CPI+4% mandate; 4% initial drawdown; hedge fund inclusion |
| Offshore portfolio (joint) | USD 850k | ~R300–R400k | Opportunistic harvesting 2–3% p.a.; CGT-managed; USD-denominated |
| Total projected gross | ~R1.075 million p.a. | Allows for lifestyle escalation and reinvestment in lighter years |
The Life Annuity Decision
Elaine used R5 million of her RA to purchase a life annuity — guaranteed income for life, rising at 6% per year, with 75% reverting to David if she predeceases him. This forms the income floor: a predictable, rising monthly payment that covers core living expenses regardless of market conditions.
The decision wasn’t automatic. Life annuities are irrevocable — once the capital is deployed, it’s gone. We modelled the break-even point (the age at which cumulative annuity payments exceed the capital invested), the value of the escalation rate relative to expected inflation, and the reversion benefit. On the numbers, the structure made sense. More importantly, it gave them certainty on the base income, which simplified every other decision in the portfolio.
For a detailed look at the trade-offs between life and living annuities, this guide covers the key considerations.
Living Annuity Strategy
David converted his R10 million RA into a living annuity drawing at an initial rate of 4% per year — R400,000 annually, well below the 5% level many financial models treat as the sustainability threshold for a CPI+4% portfolio. The conservative starting drawdown gives the portfolio more room to grow and reduces the risk of capital depletion over a 25-to-30-year retirement.
The underlying portfolio blends active and passive strategies, includes boutique and established manager exposure, and incorporates hedge funds to manage drawdown risk without sacrificing return potential. We benchmark the portfolio against CPI+4% and review the drawdown rate at each annual meeting in light of market conditions and their overall income picture.
Offshore Portfolio: Structure First, Returns Second
The USD 850k offshore portfolio is jointly held through an international custodian platform and invested in accumulation-focused ETFs and funds targeting USD CPI+3–4%. The structure was designed with three priorities: tax efficiency on withdrawals, estate simplicity, and currency flexibility.
Rather than drawing regular income from the portfolio, David and Elaine take opportunistic withdrawals of 2–3% per year when the rand is weak or when they need supplemental income. These withdrawals are structured as capital gains events rather than income, which keeps the effective tax rate meaningfully lower than the marginal rate on their annuity income.
Using offshore investment wrappers for this structure also addressed a situs tax problem they hadn’t been aware of. Before the restructure, some of their offshore holdings were in direct US equities — exposing the estate to potential US estate tax on assets above the USD 60,000 situs threshold. The wrapper eliminated that risk. It also reduced the effective CGT rate on future withdrawals from 18% to 12%, and simplified the estate administration considerably. For more on how offshore investing works for South Africans, that’s worth reading.
The Fee Model
We charge David and Elaine R60,000 per year — reflecting the genuine complexity of their engagement: multiple retirement vehicles, an offshore portfolio requiring active tax management, estate planning across jurisdictions, and biannual reviews that cover all of it.
| Fee model | Annual cost | Notes |
|---|---|---|
| Industry AUM fee (0.5%) | ~R150,000 | Based on R30m total balance sheet |
| Henceforward flat fee | R60,000 | Fixed; covers full scope of engagement |
| Annual difference | ~R90,000 | Reinvestable capital |
The offshore component does add complexity relative to a purely ZAR portfolio — and the fee reflects that. But the complexity also creates genuine planning value that a simpler engagement wouldn’t. The offshore structuring decisions alone — CGT rate reduction, situs tax elimination, estate simplification — deliver benefits that compound over time.
Frequently Asked Questions
Should entrepreneurs buy a life annuity at retirement?
Not necessarily — and not with all of their capital. A life annuity provides guaranteed, inflation-linked income for life, which makes it useful as an income floor. But it's irrevocable: once you commit the capital, it's gone. Most entrepreneurs benefit from a hybrid approach — using a portion of their RA for a life annuity to cover essential expenses, and a living annuity for the balance to retain flexibility.
What is a sustainable drawdown rate for a living annuity?
Most financial planning frameworks suggest 4–5% as the upper limit of a sustainable annual starting drawdown, assuming a portfolio targeting CPI+4% or better (And a life expectancy of 30+ years post retirement). Starting at a lower rate (3–4%) - provides more buffer for market volatility and longevity. The FSCA allows rates between 2.5% and 17.5%; higher rates feel comfortable but accelerate capital depletion.
How do offshore investment wrappers help with estate planning?
Offshore wrappers hold the investments on your behalf, removing them from your personal estate for situs tax purposes. This eliminates exposure to US and UK estate taxes on directly held shares above the relevant thresholds. They also simplify executor administration and, when structured correctly, can reduce the effective CGT rate on withdrawals from 18% to 12%.
Why does Henceforward charge more for offshore-heavy portfolios?
Offshore portfolios require ongoing attention across tax compliance, currency management, platform administration, and estate coordination — more moving parts than a ZAR-only structure. Our fee reflects that complexity honestly. David and Elaine pay R60,000 per year rather than the R36,000 Jan pays, because their engagement genuinely requires more work.
What This Engagement Delivered
David and Elaine arrived with substantial capital and a genuine desire to structure it properly. What they got was an integrated retirement income plan — guaranteed income floor, flexible living annuity, offshore capital working tax-efficiently — designed around how they actually want to live, not around what’s easiest to administer.
The offshore structuring decisions alone added value that will compound over time: lower CGT, eliminated situs risk, cleaner estate. None of those were the reason they came to us, but all of them matter.
Their annual fee is R60,000. On a R30 million balance sheet, that’s 0.2% of assets — and unlike a percentage model, it doesn’t increase if the portfolio grows. If you’re approaching retirement with a mix of local and offshore assets and want to think carefully about how the income structure should work, that’s a conversation worth having before you start drawing.
If you’re retiring in the next few years with a mix of retirement funds and offshore assets, the income structuring decisions you make at retirement are largely irreversible. We’re happy to model the options before you commit to anything.
This article is for informational purposes only and does not constitute financial advice. Henceforward (Pty) Limited is an authorised representative of Graviton Wealth Management (FSP 8772). Tax figures referenced are indicative — verify current rates and thresholds at sars.gov.za before making any decisions. Situs tax thresholds and rules are subject to change and vary by jurisdiction. Exchange control allowances are subject to SARB policy. Consult a qualified tax or legal advisor for advice specific to your circumstances.