An annuity is a payment type which takes the form of monthly installments for a specific period of time, or for the life of the recipient. A pension is a retirement plan in which the benefits are paid as an annuity, so often in common vernacular, they are the same thing.
A pension is the benefit paid from a defined benefit plan. The pension usually comes in the form of an annuity.
The annuities can be paid as single life (for the life of the participant) or joint and survivor (for the life of the participant and then a surviving spouse).
Annuities are not only bought to pay pension benefits, any person can purchase an annuity from an insurance company for any reason. Most often, they are to provide a guaranteed monthly income in retirement or to a child or spouse.
In addition to single life and joint and survivor, there are certain and life annuities. Certain and life are guaranteed for a time, such as 10 years (even if the recipient dies) and then for the remainder of his life.
Annuities, whether from a pension or not, are an excellent way to provide a floor benefit in retirement or to provide income security to a dependent.
- Photo Credit Jupiterimages/Brand X Pictures/Getty Images
What Is the Difference Between an Annuity & an IRA?
This article describes qualified and non-qualified annuities compare to traditional and Roth IRAs in terms of benefits, structures, costs and limitations.
The Difference Between VA Disability & VA Pension
Military members are often wounded or injured or contract medical conditions while serving their country. The Department of Veterans Affairs is the...
The Differences Between a Lump Sum and Annuity
Employers at times offer defined benefit retirement plans that give you a choice of taking the money in a lump sum or...
Is an Annuity the Same As a Pension?
Annuities are insurance policies that function as long-term retirement savings vehicles and may also guarantee you an income at retirement, depending on...
Difference Between Superannuation & Retirement
In the United States, people usually do not work for their entire lives; they typically cease working in their mid-60s. You may...
The Difference Between a Pension & Retirement
Pension plans and retirement plans are options offered by employers to help employees plan for retirement. A pension plan, also called a...