What's the Difference Between a Pension and an Annuity?

If you don’t have a pension, an annuity can be a great option to generate reliable retirement income.

Long before we had things like smartphones and Instagram, your career typically revolved around a single employer.

You worked for one company for decades and then, when you retired, with little to no action on your part, your company would provide you with a pension — payments that would come regularly for the rest of your life, no matter how long you lived.


Today, outside of government jobs, pensions are about as common as phone booths. If you don’t have a pension, but the idea of getting a regular payments for the rest of your life is appealing, you may want to consider an annuity. Like pensions, annuities also provide income for life, but they don’t work quite the same. So what’s the difference between a pension and an annuity?


WHAT IS A PENSION?
A pension is a retirement plan that’s offered through an employer. Pensions are known in the industry as defined benefit plans.

With a defined contribution plan, the contribution made by the company is defined — perhaps you contribute 8 percent of your salary and your company/government pays 10% of your contribution according to the Nigeria’s PENSIONS Act of 2014. However, when you get to retirement, it’s on you to decide how you’ll generate income with all the money you saved.

With a defined benefit plan, your benefit (how much you’ll get in retirement) is defined. You don’t have to worry about contributions or even how to create the income. Your company will just send you a pay every month.

In addition, many pensions will give you options for structuring your payments so that they continue in some form for your spouse after you pass away. You may also be able to take a single lump sum payment from your pension and use the money however you see fit. However, that means you’ll be responsible for generating your income, and you could run out of money someday.

Pensions are insured by a Government agency that will try to get you as much of your pension as possible if the company that backs it goes bankrupt.




WHAT IS AN ANNUITY?
Annuities are financial products built by insurance companies. They come in two main forms: annuities that help you save for retirement and annuities that provide steady income, usually in retirement. For the purposes of this article, we’re going to focus on the ones that help provide income in retirement. They’re known as income annuities.

Here’s how it works. You make a payment to an insurance company, often a portion of your retirement savings. Once you purchase the income annuity, the insurance company will make regular payments back to you over time, usually for as long as you live. That means you could live until you’re 110 or older without having to worry about running out of money.

As with a pension, once you start receiving income from an annuity, you don’t have to worry about how that income is being generated. The insurance company handles all that for you. it’s a good idea to work with a trusted financial advisor to make sure you get the right annuity for you.

As you can see, while there are some differences between pensions and annuities, the purpose of both is the same: to provide steady retirement income that you can’t outlive. If you don’t have a pension and are interested in guaranteed income for life, an annuity may be the right option for you.
Income annuities have no cash value. Once issued, this annuity cannot be terminated (surrendered), and the premium paid for the annuity is not refundable and cannot be withdrawn.

My verdict: Annuity is the best form of all the retirement plans.

Call or Chat me up to get the best retirement plan for you!

Benjamin Eyeyeh
Retirement Expert
WhatsApp 08-03-88-219-35

How does it work

As a pension consultant myself, I would love to make a contribution to your post on what is omitted. So here I go

Pension like he said is for everyone and infact compulsory for all working class. Be it private, self-employed or public worker, you are meant to have an RSA account. It is just government's way of applying common sense to avoid thousands of unkept elders above 60years of age. Sorry if my description is demeaning but that is the reality.

So, as the main point of my contribution and as far as pension is concerned according to the PRA2014, there are two programmed options for you as a citizen to take when it it time to start receiving pension and they are; PROGRAMMED WITHDRAWAL and ANNUITY. And not pension and annuity as suggested by my colleague. His enthusiasm to offer you the best option probably got the best of him, so, do not crucify him.

It is your right to be duely informed on the two options, and while we will not deny you that, I leave you with these two powerful statement and I hope you make sense of it.

1. The insurance sector today as it is in Nigeria is one of the best and solidly regulated industry in Africa(u can call it an exaggeration) but my point is for as long as the PRA2014 is concerned, regardless of whether you are in annuity or pw, the money in your RSA remains solid.

2. As a consultant, knowing fully well that nothing operated by men is 100% perfect, d shortcomings of pw remains unpromising hence, I will urge you to choose ANNUITY.

GOD BLESS YOU ALL.

KINGBEN1:
What's the Difference Between a Pension and an Annuity?

If you don’t have a pension, an annuity can be a great option to generate reliable retirement income.

Long before we had things like smartphones and Instagram, your career typically revolved around a single employer.

You worked for one company for decades and then, when you retired, with little to no action on your part, your company would provide you with a pension — payments that would come regularly for the rest of your life, no matter how long you lived.


Today, outside of government jobs, pensions are about as common as phone booths. If you don’t have a pension, but the idea of getting a regular payments for the rest of your life is appealing, you may want to consider an annuity. Like pensions, annuities also provide income for life, but they don’t work quite the same. So what’s the difference between a pension and an annuity?


WHAT IS A PENSION?
A pension is a retirement plan that’s offered through an employer. Pensions are known in the industry as defined benefit plans.

With a defined contribution plan, the contribution made by the company is defined — perhaps you contribute 8 percent of your salary and your company/government pays 10% of your contribution according to the Nigeria’s PENSIONS Act of 2014. However, when you get to retirement, it’s on you to decide how you’ll generate income with all the money you saved.

With a defined benefit plan, your benefit (how much you’ll get in retirement) is defined. You don’t have to worry about contributions or even how to create the income. Your company will just send you a pay every month.

In addition, many pensions will give you options for structuring your payments so that they continue in some form for your spouse after you pass away. You may also be able to take a single lump sum payment from your pension and use the money however you see fit. However, that means you’ll be responsible for generating your income, and you could run out of money someday.

Pensions are insured by a Government agency that will try to get you as much of your pension as possible if the company that backs it goes bankrupt.




WHAT IS AN ANNUITY?
Annuities are financial products built by insurance companies. They come in two main forms: annuities that help you save for retirement and annuities that provide steady income, usually in retirement. For the purposes of this article, we’re going to focus on the ones that help provide income in retirement. They’re known as income annuities.

Here’s how it works. You make a payment to an insurance company, often a portion of your retirement savings. Once you purchase the income annuity, the insurance company will make regular payments back to you over time, usually for as long as you live. That means you could live until you’re 110 or older without having to worry about running out of money.

As with a pension, once you start receiving income from an annuity, you don’t have to worry about how that income is being generated. The insurance company handles all that for you. it’s a good idea to work with a trusted financial advisor to make sure you get the right annuity for you.

As you can see, while there are some differences between pensions and annuities, the purpose of both is the same: to provide steady retirement income that you can’t outlive. If you don’t have a pension and are interested in guaranteed income for life, an annuity may be the right option for you.
Income annuities have no cash value. Once issued, this annuity cannot be terminated (surrendered), and the premium paid for the annuity is not refundable and cannot be withdrawn.

My verdict: Annuity is the best form of all the retirement plans.

Call or Chat me up to get the best retirement plan for you!

Benjamin Eyeyeh
Retirement Expert
WhatsApp 08-03-88-219-35

You did a fine job on the topic....

You misconstrued my topic....

We still have pension v annuity...

There some self employed who don't have a cac or not under any name cannot buy a pension plan by law.

Pension is compulsory by law but some people are not eligible to buy pension so they can buy a private annuity from an insurance company.


I am aware of the types of breakdowns...
My topic should have been...

Pension( programmed withdrawal or Annuity) versus Annuity (Insurance company based)

PapaGfad:
As a pension consultant myself, I would love to make a contribution to your post on what is omitted. So here I go

Pension like he said is for everyone and infact compulsory for all working class. Be it private, self-employed or public worker, you are meant to have an RSA account. It is just government's way of applying common sense to avoid thousands of unkept elders above 60years of age. Sorry if my description is demeaning but that is the reality.

So, as the main point of my contribution and as far as pension is concerned according to the PRA2014, there are two programmed options for you as a citizen to take when it it time to start receiving pension and they are; PROGRAMMED WITHDRAWAL and ANNUITY. And not pension and annuity as suggested by my colleague. His enthusiasm to offer you the best option probably got the best of him, so, do not crucify him.

It is your right to be duely informed on the two options, and while we will not deny you that, I leave you with these two powerful statement and I hope you make sense of it.

1. The insurance sector today as it is in Nigeria is one of the best and solidly regulated industry in Africa(u can call it an exaggeration) but my point is for as long as the PRA2014 is concerned, regardless of whether you are in annuity or pw, the money in your RSA remains solid.

2. As a consultant, knowing fully well that nothing operated by men is 100% perfect, d shortcomings of pw remains unpromising hence, I will urge you to choose ANNUITY.

GOD BLESS YOU ALL.