South Africans approaching retirement could receive significantly different pension incomes depending on how their investments perform when they stop working. Retirement fund comparisons presented by Old Mutual Corporate at an Institute of Retirement Funds Africa conference show how a market crash can affect the savings available to retirees. The findings highlight a financial risk that Gauteng workers need to understand before retirement planning.
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How Two Retirement Savers Ended Up With Different Incomes
According to the report by Katharine Child, Old Mutual Corporate investment solutions executive Marvin Nair presented a comparison involving two savers who began contributing R10 000 a month towards retirement in April 2007.
Both increased their contributions by 4.5% annually, made no early withdrawals and invested in funds targeting annual returns of at least inflation plus five percentage points.
However, when both savers reached retirement in March 2020, their accumulated savings differed considerably.
One had R3.95 million, while the other had R3.11 million. Both retired as financial markets fell during the Covid 19 pandemic.
Assuming identical annuity rates, the first saver could receive R10 000 a month from a life annuity, compared with R7 300 for the second.
The comparison used Old Mutual’s Absolute Growth Portfolios Smooth product and the median return from the Alexforbes Global Large Manager Watch Survey’s Best Investment View. Nair selected the period beginning in 2007 because it matched the launch of the Old Mutual product.
Why Retiring During a Market Crash Matters
The financial risk highlighted by the comparison is known as sequence of returns risk. It describes how the order in which an investment earns gains and suffers losses can influence the amount of money available during retirement.
For someone still working, a market downturn may be followed by years of further contributions and potential investment recovery. A person who has already retired may need to begin drawing an income immediately.
If investments lose value shortly before or after retirement, withdrawals can reduce the remaining capital available to participate in any subsequent recovery.
This matters particularly for members of market linked retirement funds, whose investments may include shares, bonds and listed property. The value of these assets can change as financial markets rise and fall.
The examples do not mean everyone who retires during a downturn will experience the same losses. Outcomes depend on the investment portfolio, the amount saved, withdrawal decisions and the type of retirement income product selected.
How Retirement Withdrawals Affect Long Term Savings
Nair also presented a second comparison involving two investors who each started with R5 million in 2007 and withdrew an income through living annuities.
Both initially withdrew R30 000 a month and increased that amount by 4.5% each year.
After 19 years, the investor in the risk managed solution had R11.5 million remaining, while the investor in the other portfolio had R3.7 million, according to the figures reported by Moneyweb.
A living annuity allows retirees to draw an income from invested retirement capital. Unlike a conventional guaranteed life annuity, its income and remaining capital depend on investment performance and withdrawals.
The comparison demonstrates how different investment approaches can produce different balances over an extended retirement period. It does not establish that either approach will deliver the same outcome in every market environment.
How Smoothed Bonus Funds Work
One approach discussed at the retirement funds conference was the use of smoothed bonus portfolios. These products aim to reduce the effect of sudden market movements on members’ retirement savings.
Nair explained that insurers operating these products may retain part of the investment returns earned during stronger market periods. They can then use reserves to support declared bonuses when markets perform poorly.
Some products also provide guarantees linked to a percentage of the fund’s value. Using Old Mutual’s AGP Stable product as an example, Nair described an 80% guarantee, under which an investment valued at R100 would have a guaranteed minimum benefit of R80 at a qualifying benefit event.
However, the level of protection depends on the product’s terms. A guarantee does not necessarily mean that the original investment is fully protected or that a particular retirement income is assured.
Financial Experts Disagree on Investment Protection
Not all investment professionals agree that smoothing returns is appropriate for every retirement saver.
Gryphon Asset Management portfolio manager Casparus Treurnicht questioned whether investors should sacrifice some of the benefits of strong market performance to reduce the effects of downturns.
Using total return data from the JSE All Share Index and MSCI World Index covering 1998 to 2026, Treurnicht said equity markets recorded positive returns in approximately 65% of the years examined.
David Shapiro, chief global equity strategist at Otto1890, also noted that investment protection comes at a cost. He suggested that smoothing may be less appealing to younger savers than to people approaching retirement.
Their views, reported by Moneyweb, highlight the tradeoffs between investment costs, potential growth and protection against market losses.
What This Means for Gauteng Residents
For Gauteng workers contributing to employer pension funds, provident funds or retirement annuities, the comparisons highlight the importance of understanding how their retirement savings are invested.
A worker approaching retirement may have less time to recover from a sudden decline in investment value than someone who still has several decades of contributions ahead.
Members can request information from their retirement fund administrators about their current investment portfolios, the fees they pay and the options available as they approach retirement.
They can also establish whether their retirement income will come from a guaranteed life annuity, a living annuity or a combination of products. Each arrangement carries different implications for income certainty, investment exposure and access to remaining capital.
The figures presented at the conference are illustrative comparisons, not forecasts of what Gauteng residents will earn from their own retirement savings.
Retirement Planning: Frequently Asked Questions
Can a market crash reduce my pension?
Yes. If your retirement savings are invested in assets whose values fluctuate, a market downturn can reduce the value of your investment. The effect on your eventual pension depends on your portfolio and retirement income arrangements.
What is sequence of returns risk?
It is the risk that investment losses occurring shortly before or after retirement will have a greater effect on your savings because you are beginning to withdraw money from the portfolio.
What is the difference between a life annuity and a living annuity?
A conventional guaranteed life annuity pays an income for life under the terms of the contract. A living annuity keeps retirement capital invested while allowing income withdrawals, meaning its sustainability depends on investment returns and withdrawal levels.
Are smoothed bonus funds guaranteed?
Not necessarily. Some products include guarantees, but the percentage protected and the circumstances in which a guarantee applies vary. Members should check the terms of their specific fund.
Should younger workers and people approaching retirement use the same investment strategy?
Their circumstances may differ because they have different investment time horizons and income needs. Retirement fund members can review their available options and seek appropriately qualified financial advice before making changes.
Understanding Retirement Risk Before Your Retirement Date
The retirement fund comparisons show that contributing similar amounts does not guarantee similar retirement incomes. Investment performance, market conditions and the way retirement savings are converted into income can all influence the final result.
For Gauteng residents, understanding these factors before their planned retirement date can help them evaluate the options offered by their retirement funds and identify questions to raise with an adviser.
Source: Based on original reporting by Katharine Child for Moneyweb, published on 28 September 2026, covering retirement investment comparisons and expert comments presented at the Institute of Retirement Funds Africa conference.
