A pension annuity is an annuity used in connection with paying your retirement benefits. An annuity is an insurance policy. This insurance policy is guaranteed to pay you a set amount of money each month for your retirement. But, if you owe money to creditors, you'll want to know whether this money is safe or not.
Your pension, whether private or government funded, is generally protected from creditors. This means that a creditor cannot take your pension funds. These protections are afforded by the Employee Retirement Income Security Act (ERISA). Your pension cannot be assigned to a third party, which includes creditors that you owe money to.
The benefit of the ERISA protections means that you won't be left without an income when you retire. Since a creditor cannot take your pension, you will still receive the money from your pension, regardless of how many judgments are issued against you. These judgments may arise out of bankruptcy, or they may be from other civil suits.
The disadvantage to the protections afforded under ERISA is that they do not extend to bank accounts. If you have your pension check directly deposited into a bank account, a creditor can still seize the account. If your pension funds are co-mingled with your non-pension money, then you may inadvertently lose some of your pension funds.
Consider cashing your pension checks instead of having them directly deposited. If you know that you will be subject to collection action by a creditor, you can have your pension checks sent to you, and you can simply cash them and keep the money or set up a bank account that is not associated with the pension funds.