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Home Pensions

CIDDF vs Annuities: Choosing the Smarter Retirement Income Option

Faith Ndunda by Faith Ndunda
June 19, 2025
in Pensions
Reading Time: 2 mins read
1049795356

1049795356

 

When retirement knocks, the question becomes not just how much you’ve saved, but how you’ll receive it. Traditionally, many retirees have turned to annuities. But in recent years, income drawdown funds have become popular. While both are designed to convert your pension savings into income, they differ significantly in structure, flexibility, and returns.

An annuity is a contract with an insurance company where you hand over your pension lump sum in exchange for a guaranteed income for life or for a fixed amount of time. An annuity gives you a fixed income for life, but often at a cost. Once you purchase an annuity from an insurance provider, your pension savings are locked in. You no longer have access to the principal, and the return is usually fixed, regardless of how the market performs. While this option provides predictability, it can limit your ability to grow your retirement wealth, especially in times of inflation or rising living costs.

An income drawdown fund on the other hand is a retirement option that allows individuals to receive regular income payments from their pension savings while the remaining balance continues to be invested. For retirees seeking control, growth, and peace of mind, the Cytonn Income Drawdown Fund (CIDDF) offers a compelling alternative to traditional annuities. CIDDF offers pensioners control over how and when they access their savings, while still benefiting from investment growth. The minimum amount that a member can withdraw is 12.0% of the fund balance per year. Unlike annuities, CIDDF does not convert your retirement lump sum into a one-size-fits-all payout. Instead, you keep your funds invested and choose your withdrawal frequency, monthly, quarterly or annually, while the remaining capital continues to earn interest. This flexibility is especially powerful in an environment where cost of living and personal needs may change frequently.

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CIDDF offers a minimum drawdown period of 10 years, after which members can opt to take the remaining amount as a lumpsum or purchase an annuity. The fund also provides tax advantages, professional fund management, and the ability to grow wealth even after retirement, making it a smart, adaptable alternative to traditional annuities. Moreover, CIDDF is regulated by the Retirement Benefits Authority (RBA) and designed in accordance with Kenya’s retirement benefit laws. It can receive funds directly from a registered pension scheme, making the transition from savings to income seamless and efficient.

Retirement should be about freedom, not limits. While annuities offer predictability, CIDDF provides empowerment ensuring you retain control, enjoy flexibility, and continue to grow your wealth.

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