Comparison of Pension & Annuity

Pensions and annuities can fund retirements.

Pensions and annuities are both retirement funding schemes. They both pay out regularly, but the payment amount for pensions and annuities differs.

Payment Amount

Pensions generally pay based on how much someone made during his career, adjusted for the length of his career. Annuities, on the other hand, pay a percentage based on how much someone invested in them.

Lump Sums

Pensions generally do not give lump sum payments. Annuities, however, have their principals accessed--for a fee. Neither program is a bank account.

Variability

Pensions are fixed, with the exception of cost of living adjustments. Annuities can also be fixed, but some annuities pay out larger or smaller amounts depending on how well the investments they are attached to perform.

References

• Investopedia: Annuities
• Duhaime.org: Definition of Pensions