When you retire from a pension or provident fund, you're generally required to buy an annuity with at least two-thirds of what you've saved. There are two kinds. Knowing which is which, and which suits your situation, is the single biggest decision most retirees make.
Life annuity.
You hand the lump sum to an insurer. In return, they promise you a fixed income for the rest of your life. The income is guaranteed. The money is no longer yours: when you die, it typically doesn't pass to your estate (unless you've bought a "joint life" or "guaranteed term" option, which reduces the income a bit).
Predictable, safe, simple. Suits people who value certainty above all, or who expect to live a long time.
Living annuity.
You keep the lump sum invested. You choose how much to draw each year, between 2.5% and 17.5%, subject to review. The balance stays invested and can grow (or shrink) with the market. Whatever's left when you die passes to your beneficiaries.
Flexible, potentially upside-ful, but also the source of most retirement-gone-wrong stories. If you draw too aggressively, or the market misbehaves at the wrong moment, a living annuity can run out.
The honest answer.
Neither is universally better. Life annuities reward longevity and certainty. Living annuities reward flexibility and leaving a legacy. Many retirees choose a blend: part life annuity for a baseline of income that never runs out, part living annuity for the rest. The right mix is personal.