Those are broadly valid points around the views around investment products offered by insurers in South African and common perceptions. However, the unattractiveness of annuities as a particular product class, both in South African and around the world, remain independent of these issues.

You make two points specifically about annuities. The inflation issue is certainly more relevant in SA than in most developed countries. That only reflects inflation risk rather than longevity risk. The tax point is valid, up to a point. Given that the appropriate backing assets for annuities are fixed income assets, the tax treatment as income is the same as what an investor could achieve if invested in a similar portfolio (but without the longevity protection).

An issue I didn’t raise in the original post relates to the miss-selling of “living annuities” (serial recipient of the most misleading product name in the world award) from a longevity risk and charge/commission perspective. Government’s plans to open up these products to a range of institutions is premised on competition decreasing costs but I don’t think it’s been thoroughly thought through just yet.

Then there’s the negative perception of the “investment” part of the life assurance industry with its history of missold policies, and the fact that the risk transfer can look insufficient when you see inflation-adjustment rate caps and you have had personal experience of high-inflation. Not only are you not certain of inflation adjustments meeting your needs, but psychologically you’ve given up control and can’t do much about this situation when it occurs (apart from find part-time work or call up your kids). I suspect this loss of control and being “at the mercy of the insurer”, combined with the negative press of the last decade odd, discourages a lot of now-retiring South Africans from purchasing annuities, even before the facts themselves are given an opportunity to speak.