AS Brokers insight · Retirement income

Why the Average Drawdown Rate Is Misleading

South Africa’s average living annuity drawdown rate recently fell to a record low. That sounds like good news for retirees — but the average can fall for the wrong reasons, hides the people most at risk, and knows nothing about your circumstances. Here is what to measure instead.

There is a number that quietly reassures South African retirees, and it deserves far more scepticism than it usually gets. Each year the industry publishes an average living annuity drawdown rate, and each year retirees glance at it and ask the same understandable question: am I below it? In 2024 that average fell to 5.6%, the lowest figure on record. On the surface it reads like proof that retirees are drawing sensibly and protecting their capital.

The reality is more complicated. The average can drop for reasons that have nothing to do with prudence. It is built in a way that masks the very people who are most at risk. And it knows nothing whatsoever about your age, your portfolio, or how long your money needs to last. Benchmarking your own income against it is one of the most common quiet mistakes in retirement planning — and it is worth understanding exactly why.

What “average drawdown rate” actually means

A living annuity lets you choose your own income each year, within limits. South African law sets that band at 2.5% to 17.5% of your capital per year, and you may adjust it once a year on your policy anniversary. (This band applies to living annuities taken out on or after 21 February 2007.) Within that range, the decision is yours — which is precisely why a benchmark feels so reassuring to reach for.

The Association for Savings and Investment South Africa (ASISA) collates drawdown data across the industry and publishes an annual average. The most recent figure, for 2024, was 5.6% — the lowest since ASISA began recording it, down from 6.6% in 2023. Over the same year the total living annuity asset pool grew to roughly R781.7 billion. Read quickly, the story writes itself: retirees are being careful. Read closely, that conclusion does not hold.

The first problem: it’s an average of the money, not of retirees

The published average is asset-weighted. It is calculated as the total rands drawn across every policy divided by the total value of the living annuity book. In other words, larger portfolios carry more weight in the final number than smaller ones.

A retiree with R10 million drawing a comfortable 3% influences the average far more than a retiree with R400,000 drawing a desperate 14%. The big, well-funded, conservatively-drawing portfolios mathematically drown out the small, stretched ones — so the headline number is pulled toward the people who least need to worry.

This is why an average and a median can tell very different stories. The average can sit at a calm 5.6% while a meaningful share of retirees draw at levels that will not last. Among those aged roughly 55 to 69, close to 30% by value draw more than 7.5% a year — a rate that typically leaves less than a decade before they reach the 17.5% ceiling. The single headline figure erases that distribution entirely. It is the same statistical sleight of hand that makes the famous “4% rule” feel safer than it is; you can read more about the 4% rule’s limits in a South African context in our companion piece.

The second problem: a falling average can be a warning, not a win

Here is the part almost no coverage explains. The 2024 drop to a record low was largely mechanical, not behavioural. ASISA’s own commentary attributes most of the fall to strong market returns: the living annuity asset pool grew by 14.6% over the year. Because the average is total drawdowns divided by total book value, a bigger denominator produces a lower percentage — even if not a single retiree changed the rands they actually took home.

Sit with that for a moment. The same retiree, drawing the same income in rands, will show a lower drawdown rate after a good market year purely because their capital grew. The number flatters them for something the market did, not something they chose.

The mirror image is the dangerous one. After a bad year, when capital falls, that same unchanged income becomes a higher drawdown rate — and it does so at exactly the moment the portfolio can least afford it. Drawing a fixed income from a shrinking pot, early in retirement, is the heart of what advisers call sequence-of-returns risk. A national average that quietly improves in good years and worsens in bad ones is not measuring prudence. It is measuring the weather.

The third problem: the average knows nothing about you

Even if the average were perfectly calculated and perfectly stable, it would still be the wrong yardstick — because it cannot see your situation. Four things matter far more than the national figure.

Your age

A 5% drawdown at 80 is a very different decision from a 5% drawdown at 60. The shorter the horizon your money must cover, the more a given rate can support.

Your portfolio

A drawdown rate is only safe relative to the real return behind it. The same 6% means one thing in a growth portfolio and quite another in a cautious one.

Your other assets

Someone deliberately running down a small pot alongside a pension and other income is in a completely different position from someone whose annuity is everything.

Your inflation

Headline CPI was 3.2% in 2025 and 4.5% by May 2026, with the Reserve Bank now targeting 3%. But a retiree’s personal inflation — weighted to medical and essentials — often runs higher.

Two retirees can hold the identical drawdown rate and reach entirely different endings — different portfolios, returns, fees, ages, and the simple bad luck of when a market fall arrives. The average cannot distinguish between them. It was never built to.

Even the people who publish it say don’t over-read it

The most authoritative source for the statistic is also the most explicit about its limits. ASISA has publicly cautioned that reading too much into the average is risky, because the industry simply does not know any individual’s circumstances — whether the policy is their only annuity, whether they hold other assets, or whether they are intentionally depleting a small pot. When the body that produces a number warns you not to lean on it personally, that is worth taking seriously.

“Being below the national average tells you almost nothing about whether your own income will last. The only benchmark that matters is your own real return.”

What to benchmark against instead

If the national average is the wrong yardstick, what is the right one? Not a single magic number — but a small set of personal questions that a good plan can answer.

Start with the prudence guideline — as a starting point, not a target

As a rough orientation, drawing around 4% to 5% in the first decade of retirement, and staying below 8% later, is generally considered sustainable. Treat that as a sanity check, not a goal to fill up to. Whether it actually holds for you depends on the questions below. If you want a fuller treatment of the principles involved, see our guide to a safe drawdown rate in South Africa.

Ask the one question that matters: is my drawdown below my real return?

This is the heart of it. If your portfolio earns 5% above inflation and you draw 4%, your capital can hold its real value. If you draw 6% while earning 5% real, your capital erodes every year — slowly at first, then faster. Your drawdown rate is only ever “safe” in relation to the return that sits behind it. The average cannot answer this question for you; only your own numbers can.

Think in drawdown by age, not drawdown by average

A sustainable rate is not a fixed point — it shifts with your age and remaining horizon. A figure that is reckless at 62 may be perfectly sensible at 82. Anchoring to your own stage of retirement is far more useful than anchoring to a national figure that blends every age together. We cover this in detail in drawdown rate by age, not by average.

Review it every year — that is what actually protects you

Your policy anniversary is not a formality. It is the one moment each year to check your drawdown against your portfolio’s real return and reset if needed. A rate chosen at retirement and never revisited is how a comfortable plan drifts, year by year, toward a stretched one without anyone noticing.

Warning signs

Signs your own rate may be too high

None of these is a diagnosis on its own, but together they are a useful prompt to sit down and look properly:

You are drawing above roughly 7.5% — which often leaves less than ten years before you reach the 17.5% ceiling.
Your income in rands keeps rising, but your portfolio is not keeping pace.
You have no buffer set aside for a bad market year, so income forces you to sell at the worst time.
Your drawdown was set at retirement and has never been formally reviewed.
You don’t know your portfolio’s real (after-inflation) return.
The national average is the only benchmark you’ve ever compared yourself to.

Key takeaways

The published average drawdown rate is asset-weighted — dominated by large, conservative portfolios, so it hides the smaller ones drawing dangerously.
A falling average can be a warning, not a victory: the 2024 record low was driven mostly by strong markets growing the asset base, not by retirees drawing less.
The average cannot see you — your age, portfolio, other assets and personal inflation matter far more than the national figure.
Even ASISA cautions against reading too much into it.
Benchmark against your own real return, by age, reviewed every year — not against a number describing the industry’s money.

Frequently asked questions

What is the average living annuity drawdown rate in South Africa?

The most recent ASISA figure is 5.6% (2024), the lowest on record, down from 6.6% in 2023.

Why is the average drawdown rate misleading?

It is weighted by fund size and says nothing about an individual’s age, portfolio, other assets or life expectancy.

Is 5.6% a safe drawdown rate for me?

Possibly, but only by coincidence. Safety depends on your real return and time horizon, not on the national average.

How is the average drawdown rate calculated?

As the total rands drawn across all policies divided by the total value of the living annuity book — so large portfolios carry more weight.

Why did the average fall in 2024?

Mostly because strong markets grew the asset base (the denominator), not because retirees broadly reduced their income.

What is the maximum I can draw?

The legal band is 2.5% to 17.5% per year, set once annually on your policy anniversary.

What is the “point of ruin”?

The point at which inflation-linked increases push you to the 17.5% ceiling, after which your income can no longer keep pace with inflation.

What drawdown rate should I use instead?

A rate below your expected real (after-inflation) return, aligned to your age — often in the 4% to 5% range early in retirement.

Can two retirees with the same rate have different outcomes?

Yes — different portfolios, returns, fees, ages and the timing of market falls produce very different results.

How often should I review my drawdown rate?

At least annually, on your policy anniversary, against your portfolio’s real return.

About AS Brokers

AS Brokers helps South African retirees, business owners and families make better long-term financial decisions through retirement planning, investments, risk management, estate planning and business assurance. Our focus is on the decisions that shape your financial future — not on selling products. If you would like a professional review of your own drawdown rate, speak to an AS Brokers adviser.

This article is educational content and does not constitute personalised financial advice. It does not guarantee returns or predict investment performance, and market values can rise or fall. Figures referenced reflect published industry and official data at the time of writing. Your own circumstances will differ — please obtain a professional review before making any changes to your living annuity or retirement income.