What is the difference between Annuity and Pension?

Annuity and Pension are both financial entitlements and benefits due to a person in consideration of past services. Both packages are planned for workers towards their retirement. Most people do not know there are some differences between annuity and Pension, probably because the two are usually used together. An annuity is a type of pension scheme or program, but you can still be getting your rewards while you are still in service. Pension, on the other hand, is a financial package paid regularly as a benefit due to a person in consideration of past services.

This money is paid to an individual once the person retires from work. What you get from an annuity depends on the level of investment you make towards the scheme, whereas what you get for Pension depends on the amount you received during your service. The lump-sum can be paid together with Pension on a monthly basis, while you can get a lump sum from annuity only if you have invested in the scheme

Both annuity and pension deal with life after retirement and the finances that one has during that period. An annuity can be bought after retirement. Buying it ensures one has a regular income. To have a pension, one saves that throughout their life.

This pension can be used as a supplement to the pension that the state government gives. It is done through an employer and frees the employee from the hassle of setting an annuity up themselves. There are different types of pensions, including defined benefit and defined contribution pensions. Annuities guarantee a stable income, but pensions have the opportunity to build one.