Jan was fifteen years into retirement when he came to us, and by most measures he was doing fine. His living annuity had held up. His income covered his lifestyle. He and his wife weren’t anxious about money.
What he was anxious about was value. After years of receiving annual statements and little else from his previous adviser, he’d started asking a simple question: what am I actually getting for this fee? The answer, when he investigated, was uncomfortable. He was paying close to 1% on a R27 million portfolio — around R270,000 a year — for a relationship that had produced no investment review, no tax planning, and no estate update in years.
He wasn’t in trouble. He just knew he could be getting more from the same capital, at a fraction of the cost.
Client Profile
| Detail | |
|---|---|
| Name | Jan |
| Age | 70 |
| Marital status | Married |
| Children | Two adult children, both living abroad |
| Life stage | Retired for 15 years |
| Living annuity | R25 million |
| Discretionary portfolio | R2 million |
| Annual drawdown | 5% from living annuity — fully covers lifestyle |
| Annual flat fee | R36,000 p.a. |
The Situation
Jan’s financial position was sound. A R25 million living annuity drawing at 5%, a small discretionary portfolio, a comfortable home, and no major financial stress. What wasn’t sound was the relationship he had with his money — or more precisely, with the person supposed to be helping him manage it.
His previous adviser charged a percentage of assets, which is common in the industry. On a R27 million balance sheet, even 0.5% amounts to R135,000 per year. Jan had a sense that number had grown quietly over the years as his portfolio did, without any corresponding increase in the service he was receiving. He came to us specifically because he’d heard that a flat fee was possible, and he wanted to understand what that actually meant in practice.
With his children living abroad, Jan also had estate planning on his mind. He wanted to ensure his assets would pass efficiently to the next generation — and that his wife would be properly provided for if he died first.
Living Annuity Overhaul
Jan’s living annuity had been invested in a broadly diversified balanced fund for years — not a bad default, but not a deliberate choice either. The portfolio had never been benchmarked, the manager mix had never been reviewed, and there was no clear mandate driving the investment decisions.
We restructured the underlying portfolio around a CPI+4% mandate, introduced a deliberate manager blend — including a number of boutique managers like Granate, Fairtree, Abax, and Bateleur alongside more established names — and added hedge fund exposure to improve downside protection and return consistency. The goal wasn’t to reinvent the wheel. It was to ensure the portfolio was being managed with purpose, not just maintained.
At a 5% drawdown on a CPI+4% target, Jan’s portfolio should sustain his income through a normal retirement horizon. We model this at each annual review and adjust if circumstances or markets shift materially. For a deeper look at how living annuity drawdown rates affect long-term capital, that’s worth reading.
Tax Planning: The RA Angle
Even though Jan is retired and drawing from his living annuity, he has a small amount of discretionary capital and, when we reviewed his position, a meaningful marginal tax rate on his annuity income. We identified an opportunity that his previous adviser had never raised: contributing a portion of his discretionary capital into a retirement annuity to generate a tax deduction.
For someone in Jan’s tax bracket, this produced a meaningful annual tax saving — money that would otherwise have gone to SARS, retained in the estate instead. It also created a degree of flexibility in how that capital could be treated from an estate planning perspective.
It’s a small structural move. But it’s exactly the kind of thing that a disengaged, percentage-based adviser has no incentive to identify — because it doesn’t grow the assets under management. We flagged it in the first year.
Discretionary Portfolio
Jan’s R2 million discretionary portfolio had a strong offshore bias when we took it on, which we agreed was appropriate — particularly with both of his children abroad and the estate implications that come with assets held in different jurisdictions. The capital isn’t required to fund Jan’s lifestyle, which meant we could take a slightly longer-term, growth-oriented approach.
We introduced exposure to global technology and innovation funds alongside quality, value-oriented global strategies — giving the portfolio meaningful upside potential over the coming years without taking on unnecessary concentration risk. The result is a well-diversified, forward-looking portfolio that can grow alongside the family’s broader interests without needing to be touched regularly.
The Fee Model
We charge Jan a flat fee of R36,000 per year. That number reflects the time and complexity involved in managing his affairs — not the size of his balance sheet.
| Fee model | Annual cost | Notes |
|---|---|---|
| Industry AUM fee (0.5%) | ~R135,000 | Based on R27m total balance sheet |
| Henceforward flat fee | R36,000 | Fixed; does not grow with the portfolio |
| Annual difference | ~R99,000 | Reinvestable or available for lifestyle |
Jan’s situation isn’t structurally complex — a well-funded living annuity and a modest discretionary portfolio doesn’t require the same advisory bandwidth as a multi-entity offshore structure. That should be reflected in the fee. The flat-fee model is honest about that in a way that percentage pricing simply isn’t.
Frequently Asked Questions
Can a retired person still contribute to a retirement annuity?
Yes, in certain circumstances. If you have taxable income — from a living annuity, rental income, or other sources — you may be able to contribute to an RA and claim a deduction. The deduction is limited to 27.5% of the higher of remuneration or taxable income, capped at R350,000 per year. This can be a meaningful tax planning tool even in retirement.
How does a flat fee differ from a percentage-based advisory fee?
A percentage-based fee charges a proportion of your assets under management — typically 0.5% to 1% per year. As your portfolio grows, the fee grows too, regardless of how much work your adviser does. A flat fee is fixed based on the complexity and time required. For clients with larger portfolios and relatively straightforward needs, the flat fee is almost always materially lower.
What happens to a living annuity when you die?
A living annuity is not part of your estate — it passes directly to your nominated beneficiaries, bypassing the executor and estate duty. Beneficiaries can elect to receive the capital as a lump sum (tax applies) or continue drawing from it as an annuity. Keeping beneficiary nominations current and aligned to your estate plan is important, particularly if your circumstances have changed.
What Changed
Jan didn’t need to be rescued. He needed better thinking applied to a position that was already solid — sharper investment management, a tax opportunity that had been overlooked, an estate structure aligned to where his family actually lives.
The fee reduction wasn’t the main point, though it was real. The more important shift was that he moved from an advisory relationship built on inertia to one built on active thinking. He now knows what his money is doing, why it’s structured the way it is, and what the plan is if things change.
If your retirement income is broadly working but you haven’t had a proper review in years — drawdown rates, investment mandate, tax position, estate — it’s worth speaking to someone who will actually look at the detail.
If you’re drawing from a living annuity and haven’t reviewed the underlying portfolio or your drawdown rate in the last two or three years, it’s worth a conversation. We’re happy to model the numbers.
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. Exchange control allowances are subject to SARB policy. Consult a qualified financial or tax advisor for advice specific to your circumstances.