1. Cash, fixed deposits and money market funds
Bank deposits and money market funds keep your capital stable and give you quick access. They suit an emergency fund and the next year or two of income.
Interest is taxed at your marginal rate after an annual exemption, which is higher from age 65. Qualifying bank deposits are also protected by the Corporation for Deposit Insurance, up to a set amount per depositor per bank.
2. Income and conservative unit trust funds
Income funds invest mainly in cash, bonds and other interest-bearing instruments. They aim to beat cash with only small ups and downs, and they can be accessed within a few days.
Conservative multi-asset funds add a modest amount of shares and property for extra growth while keeping volatility low.
3. RSA Retail Savings Bonds
These are bonds issued by the South African government directly to individuals. Fixed-rate bonds lock in an interest rate for two, three or five years, and inflation-linked bonds protect your capital against inflation over three, five or ten years.
They are low cost and backed by the government, but your money is committed for the term, so they work best for funds you will not need early.
4. Guaranteed life annuities
A life annuity, bought from an insurer with your retirement savings, pays a guaranteed income for the rest of your life, however long you live. You can choose an income that increases each year to help with inflation.
Your income is not affected by markets at all. The trade-off is flexibility: you cannot change the income later, and the capital does not pass to your heirs unless you choose a guarantee option.
5. A conservative living annuity
A living annuity keeps your capital invested in funds you choose and lets you draw between 2.5% and 17.5% a year. A conservative mix of income and low-equity funds reduces volatility, while keeping the flexibility to adjust.
Is there such a thing as a no-risk investment?
Not quite. Even the safest options carry some risk. Bank deposits can lose buying power to inflation, money market funds are not guaranteed, and bonds can lose value if sold before they mature. Government-backed RSA Retail Savings Bonds and bank deposits covered by deposit insurance come closest.
The aim is to match each part of your money to the risk it can afford to take: cash for the near term, and growth for money you will not need for many years.
Money market vs fixed deposit
A fixed deposit locks in an interest rate for a set term, such as one or five years, and your capital is secured by the bank. Breaking it early may cost you some interest. A money market fund pays a rate that moves with interest rates, and you can usually access your money within a day or two.
Rates change often, so we compare current fixed deposit, money market and retail bond rates when we advise. For a five-year horizon, a fixed deposit or a five-year retail bond locks in certainty, while a conservative unit trust may offer better growth with some ups and downs.
Balancing safety and growth
- Inflation. Retirement can last 25 years or more, so part of your money usually still needs to grow faster than inflation.
- A cash buffer. Keeping one to two years of income in cash means you do not have to sell investments when markets are down.
- A mix of options. Many retirees combine a life annuity for essential costs with a conservative living annuity or unit trusts for flexibility.
Read more in our Record of Advice and unit trust vs retirement annuity, or talk to us about your retirement plan.
Frequently asked questions.
Are there any no-risk investments?
No investment is completely risk-free. Government retail savings bonds and bank deposits covered by deposit insurance come closest, but even they can lose buying power to inflation over time.
What is the safest investment for retirees in South Africa?
There is no single safest option, because each protects against a different risk. Cash and money market funds protect your capital, inflation-linked government bonds protect against inflation, and a guaranteed life annuity protects against outliving your money.
Should all my retirement money be in low-risk investments?
Usually not. Retirement can last decades, and money held only in cash may not keep up with inflation. Most retirees keep part of their savings in growth assets, sized to their needs and comfort with risk.
How much can I safely draw from a living annuity?
It depends on your age, the size of your annuity and how it is invested. Drawing too much early on is the most common reason retirement savings run short, so we model a sustainable rate with you and review it each year.
Are RSA Retail Savings Bonds a good option?
They can be, for money you will not need before the bond matures. They are government-backed and low cost, and the inflation-linked versions protect your buying power, but early withdrawal is restricted.