Living longer often means spending a final decade or more in poor health. The double blow of empty savings and climbing medical costs is fast becoming the central financial fear of old age. That is the problem Discovery says it’s tackling with a new income plan built for longer lives. (Photo: Gallo Images / Alet Pretorius) 
The human body, with some help from modern medicine, gym memberships and kale smoothies, is staying alive longer than ever. Globally, average life expectancy has more than doubled in the past century.
“Unfortunately, retirement planning hasn’t kept pace with the new challenges that retirees will face,” says Kenny Rabson, CEO of Discovery Invest. On average, data from the World Economic Forum shows that retirees outlive their savings by more than 10 years, and for women, this gap stretches to 13 years.
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Living longer often means spending a final decade or more in poor health. The double blow of empty savings and climbing medical costs is fast becoming the central financial fear of old age.
That is the problem Discovery says it’s tackling with a new income plan built for longer lives.
Cracks in the system
The South African retirement minefield is worsened by a healthcare funding crisis that looks increasingly unsustainable. Medical schemes are “systematically reducing benefits and transforming more risk on to the member”, says Martin Rimmer, CEO of Sirago Underwriting Managers, while costs have consistently outpaced inflation by more than double for years.
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The consequences are visible in “mega gap claims”, Rimmer explains, exceeding R50,000, which have “exploded by 512% in volume and 437% in value between 2020 and 2024”.
Financial advice is also part of the problem. “Too often the conversation begins with the product rather than the person,” says Multilink Financial Services CEO Pedri Reyneke. “If your adviser can’t explain it simply, they either don’t understand it or they don’t want you to. And if they lead with the product, they’re not an adviser and are in it for the wrong reasons.”
Old-school solutions fall flat
Living annuities allow retirees to control withdrawals and keep capital invested, but come with the risk of spending too much or markets turning against them, which means your money can vanish faster than expected.
Fixed annuities guarantee fixed income for life, but at a cost. Retirees are stuck with rigid payouts, unlucky if they buy at the wrong time, and they typically lose their capital on death.
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A hybrid annuity combines aspects of both living and fixed annuities, but Rabson explains that these structures are generally “not a great solution” as they “inherit the drawbacks of both”.
Discovery’s counterpunch
Discovery Invest’s Lifespan Linked Income Plan, billed as a market-first solution in South Africa, is pitched as a clean break from those models.
“This product works differently – it keeps full flexibility and growth potential early in retirement while using a cost-efficient, deferred guarantee that only activates from age 80,” Rabson says.
The product combines four promises into one structure:
- Flexibility: Retirees can change withdrawals as their lifestyle and health change.
- Growth: Investments stay in the market throughout retirement.
- Longevity cover: From age 80, a low-cost guarantee kicks in to provide income for life, avoiding the expense of locking money away too soon.
- Legacy: Any remaining capital can pass to beneficiaries upon death.
Healthy living as a financial asset
In true Discovery fashion, healthy physical and financial behaviour is built into the model. Retirees who live healthier and withdraw responsibly are rewarded with income boosts of up to 50%.
According to Discovery’s data, this approach has reduced withdrawal rates, potentially leaving retirement funds 30% higher than they would otherwise have been, and has resulted in 17% to 46% retirement income enhancements for healthy retirees.
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“The boosts in retirement are very helpful because an extra 20%, 30% per month, that has to help in terms of what’s your disposable income to afford your health insurance and all of those things,” Rabson says. Globally, similar models are drawing attention. South Africa, he says, is the first country with this type of concept.
Beyond products
Discovery is eager to emphasise that new structures mean little without disciplined planning. “You need to think about the whole retirement journey: pre-retirement, post-retirement and how it all sits together,” Rabson says.
If you delay contributing towards a retirement plan, the maths don’t work in your favour. “If you’re only saving at [age] 40 or 50 for retirement, you need to contribute about 40% of your income.” Start early, he says, and you only have to put aside a single-digit percentage of your monthly income.
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Advisers also need to evolve. “Part of the challenge is educating financial advisers that the world is changing very quickly and a financial adviser’s role is also changing,” Robson notes. The practice of planning only until a client reaches 80 is gone. Retirement can now stretch for far longer and so requires a new outlook.
Discovery is wagering that its Lifespan Linked Income Plan will help South Africans not only live longer, but live well enough to afford it. DM