The minister of finance recently published regulations around certain COVID 19 relief for living annuity policy owners. The changes are summarised below:
- Drawdown rates – Normally, a living annuity owner would be allowed to take a drawdown of between 2.5% and 17.5% of their total assets in the living annuity per annum as an income. Also, the drawdown could only be changed on the policy anniversary date. The recently published regulations now allow living annuity owners the chance to change their drawdown levels to anything between 0.5% and 20%. This change is effective from 1 June 2020 and will expire in September 2020. So it is important to note that even if you have made a selection in terms of the drawdown for this year, these regulations allow you to make another change for this specific period. Thereafter it will default back to your old drawdown rate.
- Cash out value – as of 1 March 2020, you can cash out from a living annuity policy if your capital amount remaining in the living annuity is R125 000 or less. This amount will apply irrespective of whether you take a lump sum at retirement or not. Previously, this amount was R50 000 if at retirement you took a cash lump and R75 000 if you never took a cash lump at retirement. This creates a better chance for living annuity owners to be allowed to access the capital within the living annuity.
Please speak to a financial adviser before making any changes to fully understand the impact that it may have on your finances and your living annuity policy.