High living-annuity drawdowns raise retirement concerns

Momentum Group has warned that clients on its living-annuity book are drawing between 7.5% and 8% of their capital a year, well above the 4% to 5% rule of thumb generally associated with sustaining retirement income over a 25- to 30-year period.

The warning was reported by Eleanor Becker for Citywire as the group released results for the year to 30 June 2026. Momentum reported record earnings and exceeded its R7bn normalised headline earnings (NHE) target a year ahead of schedule.

NHE increased 13% to R7.06bn, while operating profit rose 9% to R5.97bn. NHE per share increased 18% to 530c and return on equity reached 21.7%. The results also showed a shift in the composition of new retirement business.

Guaranteed annuity sales declined, while living annuity volumes increased. The insurer said lower long-term yields had contributed to the change, with guaranteed annuities becoming less attractive relative to living annuities.

Momentum Investments' value of new business (VNB) declined from R509m to R357m, largely because of the shift towards lower-margin living annuity business. Despite this, the division's NHE increased 24% to R1.19bn.

Its assets under management and administration increased from R934bn to more than R1.2tn, while net flows moved from a R34bn outflow to a R20bn inflow.

The group's adviser-led wealth platform also expanded, with assets rising from R277bn to R362bn and net inflows increasing from R6bn to more than R16bn. Citywire highlighted the platform's more than R16bn in net inflows in its report on the results.

Five Momentum businesses generated more than R1bn in NHE during the year: Momentum Retail at R1.01bn, Momentum Investments at R1.19bn, Metropolitan Life at R1.15bn, Momentum Corporate at R1.42bn and Guardrisk at R1.04bn.

Group new-business sales rose 18% to R93.8bn, while VNB increased 5% to R491m. The overall VNB margin declined from 0.6% to 0.5%. Momentum Corporate's NHE fell 12% to R1.42bn, partly because of lower reserve releases.

Momentum declared a final dividend of 120c a share, taking the full-year dividend to 230c, up 31% from the previous year and representing a 43% payout ratio. The group also completed its R1bn share buyback, repurchasing 27.4 million shares at an average price of R36.45.

The group is expected to set out its next strategic plan, covering the period to FY2030, within the next 12 months.