As a government employee, can you genuinely take full control of your income when you retire or resign?
Earlier this week, Grace reached out for assistance. She resigned less than a year ago and now wanted access to some of her capital. After all, it’s her money—so why couldn’t she easily access it?
But here’s where things get tricky:
She could only change her income once per year.
I’m Dhevan Naicker, your retirement specialist, dedicated to helping government employees like you navigate retirement, resignation, and strategic financial planning decisions.
In this article, I’ll share five “Income for Life” options available to you upon resignation and how each option affects your ability to control your income. I’ll also provide practical strategies to ensure you retain maximum control and avoid common pitfalls.
The 5 Income-for-Life Options
1. Income for Life – Capital Surrendered
In this scenario, the insurance company takes full control of your capital. It is no longer yours. In return, they guarantee a fixed income for life.
Pros:
- Predictable, fixed income.
- Flexibility in choosing annual increases initially.
Cons:
- No capital inheritance for your spouse or children; your income ends when you pass away.
- Capital stays permanently with the insurer.
2. Income for Life with Spousal Benefit
Similar to option one, except this guarantees income for both you and your spouse.
Pros:
- Ensures your spouse receives income after your passing.
- Adjustable spousal income (50%, 75%, or 100%).
Cons:
- Lower initial income the higher the spousal benefit chosen.
- Capital still permanently surrendered.
3. Income with Guaranteed Term
This provides income for a predetermined guaranteed period (1-25 years), regardless of whether you or your spouse pass away.
Pros:
- Ensures beneficiaries continue receiving payments if both you and your spouse pass away within the guarantee period.
- Provides predictable income security for beneficiaries.
Cons:
- Income stops completely after the guaranteed term.
- No residual capital returned.
4. Income Plus Life Cover
Your capital funds both your income and a life insurance policy. For example, if your two-thirds capital is R2 million, you receive monthly income and an equivalent R2 million life cover policy payout upon death.
Pros:
- Your family receives a defined lump sum life cover.
- Predictable and secure income during your lifetime.
Cons:
- Premiums for life cover must be paid, affecting your available monthly income.
- Usually no annual income increase.
- Tax implications must be carefully considered.
5. Living Annuity – You Retain Control
The most popular option in our Retire vs Resign Masterclass. You retain control over your capital, making strategic choices about your investment and income.
Pros:
- Complete control over capital investment.
- Annual flexibility to adjust income (2.5%-17.5%).
- Full control over beneficiary inheritance and frequency of income payments.
- Ability to pass remaining capital to heirs upon death.
Cons:
- Requires strong financial discipline and annual planning.
- Needs expert advice for optimal tax efficiency and investment management.
Which Option Is Best for You?
Your ideal choice depends on your unique financial goals, family considerations, and retirement lifestyle aspirations. Consider:
- Legacy planning (inheritance).
- Desired flexibility and control.
- Tax implications.
- Level of financial discipline required.
Recommended Next Steps:
To ensure you make the best decision:
- Join our Retire vs Resign Masterclass for deeper insights.
- Schedule a personalised, one-on-one consultation to thoroughly evaluate your situation.
Final Thoughts
I hope this breakdown has provided clarity on the available “income for life” options and their impact on your financial control post-retirement or resignation.
Did you find this article helpful? Let me know your biggest takeaway or any further questions in the comments below!
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See you in the next article!
Disclaimers:
- Retirement Wellness SA is an Authorised Financial Services Provider (FSP 31609). This article provides information, not direct advice.
- This information is not provided by or on behalf of the Government Employees Pension Fund (GEPF). We do not act on behalf of the GEPF.
